Correlation Between Dropbox and Corpay

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

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

Diversification Opportunities for Dropbox and Corpay

0.68

Correlation Coefficient

Dropbox  Corpay

Poor diversification

The 3 months correlation between Dropbox and Corpay is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dropbox and Corpay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corpay Inc and Dropbox 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 Dropbox are associated (or correlated) with Corpay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corpay Inc has no effect on the direction of Dropbox i.e., Dropbox and Corpay go up and down completely randomly.

Pair Corralation between Dropbox and Corpay

Considering the 90-day investment horizon Dropbox is expected to generate 1.19 times more return on investment than Corpay. However, Dropbox is 1.19 times more volatile than Corpay Inc. It trades about 0.17 of its potential returns per unit of risk. Corpay Inc is currently generating about -0.01 per unit of risk. If you would invest  2,628  in Dropbox on September 22, 2024 and sell it today you would earn a total of  397.00  from holding Dropbox or generate 15.11% return on investment over 90 days.

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

Dropbox  vs.  Corpay Inc

Dropbox

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dropbox are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Dropbox showed solid returns over the last few months and may actually be approaching a breakup point.

Corpay Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corpay Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Corpay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dropbox and Corpay

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

The idea behind Dropbox and Corpay 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.