Correlation Between Dentsply Sirona and Avita Medical

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

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

Diversification Opportunities for Dentsply Sirona and Avita Medical

0.26

Correlation Coefficient

Dentsply Sirona  Avita Medical

Modest diversification

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

Pair Corralation between Dentsply Sirona and Avita Medical

Given the investment horizon of 90 days Dentsply Sirona is expected to under-perform the Avita Medical. But the stock apears to be less risky and, when comparing its historical volatility, Dentsply Sirona is 2.25 times less risky than Avita Medical. The stock trades about -0.41 of its potential returns per unit of risk. The Avita Medical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Avita Medical on December 4, 2024 and sell it today you would lose (14.00) from holding Avita Medical or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Dentsply Sirona  vs.  Avita Medical

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.

Avita Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avita Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dentsply Sirona and Avita Medical

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

The idea behind Dentsply Sirona and Avita Medical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.