Correlation Between Dentsply Sirona and Auto Trader

Can any of the company-specific risk be diversified away by investing in both Dentsply Sirona and Auto Trader 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 Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dentsply Sirona and Auto Trader Group, you can compare the effects of market volatilities on Dentsply Sirona and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsply Sirona and Auto Trader.

Diversification Opportunities for Dentsply Sirona and Auto Trader

0.83

Correlation Coefficient

Dentsply Sirona  Auto Trader

Very poor diversification

The 3 months correlation between Dentsply and Auto is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and Auto Trader go up and down completely randomly.

Pair Corralation between Dentsply Sirona and Auto Trader

Assuming the 90 days trading horizon Dentsply Sirona is expected to under-perform the Auto Trader. In addition to that, Dentsply Sirona is 2.37 times more volatile than Auto Trader Group. It trades about -0.24 of its total potential returns per unit of risk. Auto Trader Group is currently generating about -0.36 per unit of volatility. If you would invest  82,036  in Auto Trader Group on October 12, 2024 and sell it today you would lose (3,916) from holding Auto Trader Group or give up 4.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dentsply Sirona  vs.  Auto Trader Group

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Dentsply Sirona and Auto Trader

The main advantage of trading using opposite Dentsply Sirona and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dentsply Sirona position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.

The idea behind Dentsply Sirona and Auto Trader Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.