Correlation Between Dropbox and Microsoft
Can any of the company-specific risk be diversified away by investing in both Dropbox and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dropbox and Microsoft, you can compare the effects of market volatilities on Dropbox and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dropbox and Microsoft.
Diversification Opportunities for Dropbox and Microsoft
Excellent diversification
The 3 months correlation between Dropbox and Microsoft is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dropbox and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Dropbox i.e., Dropbox and Microsoft go up and down completely randomly.
Pair Corralation between Dropbox and Microsoft
Considering the 90-day investment horizon Dropbox is expected to generate 3.27 times less return on investment than Microsoft. In addition to that, Dropbox is 1.21 times more volatile than Microsoft. It trades about 0.01 of its total potential returns per unit of risk. Microsoft is currently generating about 0.05 per unit of volatility. If you would invest 28,448 in Microsoft on January 18, 2024 and sell it today you would earn a total of 12,736 from holding Microsoft or generate 44.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dropbox vs. Microsoft
Performance |
| Timeline |
| Dropbox |
| Microsoft |
Dropbox and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dropbox and Microsoft
The main advantage of trading using opposite Dropbox and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dropbox position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.The idea behind Dropbox and Microsoft 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.| Microsoft vs. Cloudflare | Microsoft vs. Okta Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Nutanix |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |