Correlation Between ICU Medical and Dentsply Sirona

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

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

Diversification Opportunities for ICU Medical and Dentsply Sirona

0.86

Correlation Coefficient

ICU Medical  Dentsply Sirona

Very poor diversification

The 3 months correlation between ICU and Dentsply is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ICU Medical and Dentsply Sirona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsply Sirona and ICU Medical 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 ICU Medical are associated (or correlated) with Dentsply Sirona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsply Sirona has no effect on the direction of ICU Medical i.e., ICU Medical and Dentsply Sirona go up and down completely randomly.

Pair Corralation between ICU Medical and Dentsply Sirona

Given the investment horizon of 90 days ICU Medical is expected to generate 1.1 times more return on investment than Dentsply Sirona. However, ICU Medical is 1.1 times more volatile than Dentsply Sirona. It trades about -0.03 of its potential returns per unit of risk. Dentsply Sirona is currently generating about -0.15 per unit of risk. If you would invest  15,420  in ICU Medical on December 28, 2024 and sell it today you would lose (992.00) from holding ICU Medical or give up 6.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

ICU Medical  vs.  Dentsply Sirona

ICU Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICU Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ICU Medical is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Dentsply Sirona

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ICU Medical and Dentsply Sirona

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

The idea behind ICU Medical and Dentsply Sirona 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.