Correlation Between GigaCloud Technology and Dropbox

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

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

Diversification Opportunities for GigaCloud Technology and Dropbox

0.87

Correlation Coefficient

GigaCloud Technology  Dropbox

Very poor diversification

The 3 months correlation between GigaCloud and Dropbox is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GigaCloud Technology Class and Dropbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dropbox and GigaCloud Technology 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 GigaCloud Technology Class 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 GigaCloud Technology i.e., GigaCloud Technology and Dropbox go up and down completely randomly.

Pair Corralation between GigaCloud Technology and Dropbox

Considering the 90-day investment horizon GigaCloud Technology Class is expected to generate 1.49 times more return on investment than Dropbox. However, GigaCloud Technology is 1.49 times more volatile than Dropbox. It trades about -0.04 of its potential returns per unit of risk. Dropbox is currently generating about -0.07 per unit of risk. If you would invest  1,717  in GigaCloud Technology Class on December 29, 2024 and sell it today you would lose (206.00) from holding GigaCloud Technology Class or give up 12.0% of portfolio value over 90 days.

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

GigaCloud Technology Class  vs.  Dropbox

GigaCloud Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days GigaCloud Technology Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 GigaCloud Technology and Dropbox

The main advantage of trading using opposite GigaCloud Technology and Dropbox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaCloud Technology 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 GigaCloud Technology Class 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.