Correlation Between ACI Worldwide and Dropbox

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

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

Diversification Opportunities for ACI Worldwide and Dropbox

0.02

Correlation Coefficient

ACI Worldwide  Dropbox

Significant diversification

The 3 months correlation between ACI and Dropbox is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ACI Worldwide and Dropbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dropbox and ACI Worldwide 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 ACI Worldwide are associated (or correlated) with Dropbox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dropbox has no effect on the direction of ACI Worldwide i.e., ACI Worldwide and Dropbox go up and down completely randomly.

Pair Corralation between ACI Worldwide and Dropbox

Given the investment horizon of 90 days ACI Worldwide is expected to generate 0.77 times more return on investment than Dropbox. However, ACI Worldwide is 1.3 times less risky than Dropbox. It trades about 0.07 of its potential returns per unit of risk. Dropbox is currently generating about -0.06 per unit of risk. If you would invest  5,149  in ACI Worldwide on December 28, 2024 and sell it today you would earn a total of  368.00  from holding ACI Worldwide or generate 7.15% return on investment over 90 days.

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

ACI Worldwide  vs.  Dropbox

ACI Worldwide

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ACI Worldwide are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, ACI Worldwide may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dropbox

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dropbox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers 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 ACI Worldwide and Dropbox

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

The idea behind ACI Worldwide and Dropbox 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..