Correlation Between Tandem Diabetes and Dentsply Sirona

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

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

Diversification Opportunities for Tandem Diabetes and Dentsply Sirona

-0.83

Correlation Coefficient

Tandem Diabetes  Dentsply Sirona

Pay attention - limited upside

The 3 months correlation between Tandem and Dentsply is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Dentsply Sirona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsply Sirona and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and Dentsply Sirona go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Dentsply Sirona

Given the investment horizon of 90 days Tandem Diabetes Care is expected to generate 3.65 times more return on investment than Dentsply Sirona. However, Tandem Diabetes is 3.65 times more volatile than Dentsply Sirona. It trades about 0.29 of its potential returns per unit of risk. Dentsply Sirona is currently generating about -0.24 per unit of risk. If you would invest  3,296  in Tandem Diabetes Care on February 16, 2024 and sell it today you would earn a total of  1,388  from holding Tandem Diabetes Care or generate 42.11% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  Dentsply Sirona

Tandem Diabetes Care

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tandem Diabetes Care are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tandem Diabetes displayed solid returns over the last few months and may actually be approaching a breakup point.

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tandem Diabetes and Dentsply Sirona

The main advantage of trading using opposite Tandem Diabetes and Dentsply Sirona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.