Correlation Between DENTSPLY SIRONA and Microchip Technology

Can any of the company-specific risk be diversified away by investing in both DENTSPLY SIRONA and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DENTSPLY SIRONA and Microchip Technology Incorporated, you can compare the effects of market volatilities on DENTSPLY SIRONA and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENTSPLY SIRONA and Microchip Technology.

Diversification Opportunities for DENTSPLY SIRONA and Microchip Technology

0.55

Correlation Coefficient

DENTSPLY SIRONA  Microchip Technology

Very weak diversification

The 3 months correlation between DENTSPLY and Microchip is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding DENTSPLY SIRONA and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of DENTSPLY SIRONA i.e., DENTSPLY SIRONA and Microchip Technology go up and down completely randomly.

Pair Corralation between DENTSPLY SIRONA and Microchip Technology

Assuming the 90 days trading horizon DENTSPLY SIRONA is expected to generate 0.05 times more return on investment than Microchip Technology. However, DENTSPLY SIRONA is 19.67 times less risky than Microchip Technology. It trades about 0.24 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.19 per unit of risk. If you would invest  13,955  in DENTSPLY SIRONA on October 8, 2024 and sell it today you would earn a total of  68.00  from holding DENTSPLY SIRONA or generate 0.49% return on investment over 90 days.

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

DENTSPLY SIRONA  vs.  Microchip Technology Incorpora

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 somewhat strong basic indicators, DENTSPLY SIRONA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DENTSPLY SIRONA and Microchip Technology

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

The idea behind DENTSPLY SIRONA and Microchip Technology Incorporated 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.