Correlation Between Patterson Companies and Henry Schein

Can any of the company-specific risk be diversified away by investing in both Patterson Companies and Henry Schein 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 Patterson Companies and Henry Schein into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Patterson Companies and Henry Schein

0.26

Correlation Coefficient

Patterson Companies  Henry Schein

Modest diversification

The 3 months correlation between Patterson and Henry is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Patterson Companies and Henry Schein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henry Schein and Patterson Companies 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 Patterson Companies are associated (or correlated) with Henry Schein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henry Schein has no effect on the direction of Patterson Companies i.e., Patterson Companies and Henry Schein go up and down completely randomly.

Pair Corralation between Patterson Companies and Henry Schein

Given the investment horizon of 90 days Patterson Companies is expected to under-perform the Henry Schein. In addition to that, Patterson Companies is 1.17 times more volatile than Henry Schein. It trades about -0.01 of its total potential returns per unit of risk. Henry Schein is currently generating about 0.09 per unit of volatility. If you would invest  7,046  in Henry Schein on August 31, 2024 and sell it today you would earn a total of  659.00  from holding Henry Schein or generate 9.35% return on investment over 90 days.

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

Patterson Companies  vs.  Henry Schein

Patterson Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patterson Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Patterson Companies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Henry Schein

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Henry Schein are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, Henry Schein may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Patterson Companies and Henry Schein

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

The idea behind Patterson Companies and Henry Schein 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.