Correlation Between Dentsply Sirona and Renesas Electronics

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

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

Diversification Opportunities for Dentsply Sirona and Renesas Electronics

0.37

Correlation Coefficient

Dentsply Sirona  Renesas Electronics

Weak diversification

The 3 months correlation between Dentsply and Renesas is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and Renesas Electronics go up and down completely randomly.

Pair Corralation between Dentsply Sirona and Renesas Electronics

Assuming the 90 days horizon Dentsply Sirona is expected to generate 0.46 times more return on investment than Renesas Electronics. However, Dentsply Sirona is 2.19 times less risky than Renesas Electronics. It trades about -0.08 of its potential returns per unit of risk. Renesas Electronics is currently generating about -0.04 per unit of risk. If you would invest  1,827  in Dentsply Sirona on October 11, 2024 and sell it today you would lose (36.00) from holding Dentsply Sirona or give up 1.97% of portfolio value over 90 days.

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

Dentsply Sirona  vs.  Renesas Electronics

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Renesas Electronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dentsply Sirona and Renesas Electronics

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

The idea behind Dentsply Sirona and Renesas Electronics 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.