Correlation Between KOBE STEEL and Dentsply Sirona

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

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

Diversification Opportunities for KOBE STEEL and Dentsply Sirona

-0.63

Correlation Coefficient

KOBE STEEL  Dentsply Sirona

Excellent diversification

The 3 months correlation between KOBE and Dentsply is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding KOBE STEEL LTD and Dentsply Sirona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsply Sirona and KOBE STEEL 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 KOBE STEEL LTD 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 KOBE STEEL i.e., KOBE STEEL and Dentsply Sirona go up and down completely randomly.

Pair Corralation between KOBE STEEL and Dentsply Sirona

Assuming the 90 days trading horizon KOBE STEEL LTD is expected to generate 1.1 times more return on investment than Dentsply Sirona. However, KOBE STEEL is 1.1 times more volatile than Dentsply Sirona. It trades about 0.2 of its potential returns per unit of risk. Dentsply Sirona is currently generating about -0.18 per unit of risk. If you would invest  902.00  in KOBE STEEL LTD on December 22, 2024 and sell it today you would earn a total of  259.00  from holding KOBE STEEL LTD or generate 28.71% return on investment over 90 days.

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

KOBE STEEL LTD  vs.  Dentsply Sirona

KOBE STEEL LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KOBE STEEL LTD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KOBE STEEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with KOBE STEEL and Dentsply Sirona

The main advantage of trading using opposite KOBE STEEL and Dentsply Sirona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOBE STEEL 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 KOBE STEEL LTD 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.