Correlation Between Dentsply Sirona and Heidelberg Materials

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Can any of the company-specific risk be diversified away by investing in both Dentsply Sirona and Heidelberg Materials 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 Heidelberg Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dentsply Sirona and Heidelberg Materials AG, you can compare the effects of market volatilities on Dentsply Sirona and Heidelberg Materials 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 Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsply Sirona and Heidelberg Materials.

Diversification Opportunities for Dentsply Sirona and Heidelberg Materials

-0.89
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Dentsply and Heidelberg is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and Heidelberg Materials go up and down completely randomly.

Pair Corralation between Dentsply Sirona and Heidelberg Materials

Assuming the 90 days horizon Dentsply Sirona is expected to under-perform the Heidelberg Materials. In addition to that, Dentsply Sirona is 1.45 times more volatile than Heidelberg Materials AG. It trades about -0.04 of its total potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.12 per unit of volatility. If you would invest  5,466  in Heidelberg Materials AG on October 13, 2024 and sell it today you would earn a total of  7,119  from holding Heidelberg Materials AG or generate 130.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dentsply Sirona  vs.  Heidelberg Materials AG

 Performance 
       Timeline  
Dentsply Sirona 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dentsply Sirona has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Heidelberg Materials 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, Heidelberg Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dentsply Sirona and Heidelberg Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dentsply Sirona and Heidelberg Materials

The main advantage of trading using opposite Dentsply Sirona and Heidelberg Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dentsply Sirona position performs unexpectedly, Heidelberg Materials 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 Heidelberg Materials will offset losses from the drop in Heidelberg Materials' long position.
The idea behind Dentsply Sirona and Heidelberg Materials AG 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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