Correlation Between Renesas Electronics and Dentsply Sirona

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

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

Diversification Opportunities for Renesas Electronics and Dentsply Sirona

-0.04

Correlation Coefficient

Renesas Electronics  Dentsply Sirona

Good diversification

The 3 months correlation between Renesas and Dentsply is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and Dentsply Sirona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsply Sirona and Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics i.e., Renesas Electronics and Dentsply Sirona go up and down completely randomly.

Pair Corralation between Renesas Electronics and Dentsply Sirona

Assuming the 90 days horizon Renesas Electronics is expected to generate 1.45 times more return on investment than Dentsply Sirona. However, Renesas Electronics is 1.45 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 -0.05 per unit of risk. If you would invest  980.00  in Renesas Electronics on October 25, 2024 and sell it today you would earn a total of  333.00  from holding Renesas Electronics or generate 33.98% return on investment over 90 days.

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

Renesas Electronics  vs.  Dentsply Sirona

Renesas Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Renesas Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Renesas Electronics and Dentsply Sirona

The main advantage of trading using opposite Renesas Electronics and Dentsply Sirona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics 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 Renesas Electronics 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.