Correlation Between Embecta Corp and Dentsply Sirona

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

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

Diversification Opportunities for Embecta Corp and Dentsply Sirona

0.86

Correlation Coefficient

Embecta Corp  Dentsply Sirona

Very poor diversification

The 3 months correlation between Embecta and Dentsply is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Dentsply Sirona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsply Sirona and Embecta Corp 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 Embecta Corp 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 Embecta Corp i.e., Embecta Corp and Dentsply Sirona go up and down completely randomly.

Pair Corralation between Embecta Corp and Dentsply Sirona

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the Dentsply Sirona. In addition to that, Embecta Corp is 2.27 times more volatile than Dentsply Sirona. It trades about -0.39 of its total potential returns per unit of risk. Dentsply Sirona is currently generating about -0.27 per unit of volatility. If you would invest  3,225  in Dentsply Sirona on January 31, 2024 and sell it today you would lose (224.00) from holding Dentsply Sirona or give up 6.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Embecta Corp  vs.  Dentsply Sirona

Embecta Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embecta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Embecta Corp and Dentsply Sirona

The main advantage of trading using opposite Embecta Corp and Dentsply Sirona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embecta Corp 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 Embecta Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.