Correlation Between DENTSPLY SIRONA and Visa

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

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

Diversification Opportunities for DENTSPLY SIRONA and Visa

-0.48

Correlation Coefficient

DENTSPLY SIRONA  Visa

Very good diversification

The 3 months correlation between DENTSPLY and Visa is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding DENTSPLY SIRONA and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of DENTSPLY SIRONA i.e., DENTSPLY SIRONA and Visa go up and down completely randomly.

Pair Corralation between DENTSPLY SIRONA and Visa

Assuming the 90 days trading horizon DENTSPLY SIRONA is expected to generate 225.57 times less return on investment than Visa. But when comparing it to its historical volatility, DENTSPLY SIRONA is 15.38 times less risky than Visa. It trades about 0.01 of its potential returns per unit of risk. Visa Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  8,734  in Visa Inc on October 7, 2024 and sell it today you would earn a total of  1,063  from holding Visa Inc or generate 12.17% return on investment over 90 days.

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

DENTSPLY SIRONA  vs.  Visa Inc

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.

Visa Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DENTSPLY SIRONA and Visa

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

The idea behind DENTSPLY SIRONA and Visa Inc 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.