Correlation Between Dentsply Sirona and Automatic Data

Can any of the company-specific risk be diversified away by investing in both Dentsply Sirona and Automatic Data at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dentsply Sirona and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dentsply Sirona and Automatic Data Processing, you can compare the effects of market volatilities on Dentsply Sirona and Automatic Data and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dentsply Sirona with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsply Sirona and Automatic Data.

Diversification Opportunities for Dentsply Sirona and Automatic Data

-0.9

Correlation Coefficient

Dentsply Sirona  Automatic Data

Pay attention - limited upside

The 3 months correlation between Dentsply and Automatic is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Dentsply Sirona is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dentsply Sirona are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and Automatic Data go up and down completely randomly.

Pair Corralation between Dentsply Sirona and Automatic Data

Assuming the 90 days trading horizon Dentsply Sirona is expected to under-perform the Automatic Data. But the stock apears to be less risky and, when comparing its historical volatility, Dentsply Sirona is 2.65 times less risky than Automatic Data. The stock trades about -0.03 of its potential returns per unit of risk. The Automatic Data Processing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  23,100  in Automatic Data Processing on September 19, 2024 and sell it today you would earn a total of  6,140  from holding Automatic Data Processing or generate 26.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	89.72%
Values	Daily Returns

Dentsply Sirona  vs.  Automatic Data Processing

Dentsply Sirona

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsply Sirona has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Automatic Data Processing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Automatic Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dentsply Sirona and Automatic Data

The main advantage of trading using opposite Dentsply Sirona and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dentsply Sirona position performs unexpectedly, Automatic Data can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Automatic Data will offset losses from the drop in Automatic Data's long position.

The idea behind Dentsply Sirona and Automatic Data Processing pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..