Correlation Between Dropbox and DigiAsia Corp

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

By analyzing existing cross correlation between Dropbox and DigiAsia Corp, you can compare the effects of market volatilities on Dropbox and DigiAsia Corp 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 DigiAsia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dropbox and DigiAsia Corp.

Diversification Opportunities for Dropbox and DigiAsia Corp

-0.1

Correlation Coefficient

Dropbox  DigiAsia Corp

Good diversification

The 3 months correlation between Dropbox and DigiAsia is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dropbox and DigiAsia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiAsia Corp 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 DigiAsia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiAsia Corp has no effect on the direction of Dropbox i.e., Dropbox and DigiAsia Corp go up and down completely randomly.

Pair Corralation between Dropbox and DigiAsia Corp

Considering the 90-day investment horizon Dropbox is expected to under-perform the DigiAsia Corp. But the stock apears to be less risky and, when comparing its historical volatility, Dropbox is 5.56 times less risky than DigiAsia Corp. The stock trades about -0.02 of its potential returns per unit of risk. The DigiAsia Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  58.00  in DigiAsia Corp on November 28, 2024 and sell it today you would lose (5.00) from holding DigiAsia Corp or give up 8.62% of portfolio value over 90 days.

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

Dropbox  vs.  DigiAsia Corp

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 fairly strong fundamental drivers, Dropbox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DigiAsia Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DigiAsia Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, DigiAsia Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dropbox and DigiAsia Corp

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

The idea behind Dropbox and DigiAsia Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.