Correlation Between Estee Lauder and Dropbox
Can any of the company-specific risk be diversified away by investing in both Estee Lauder 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 Estee Lauder and Dropbox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Estee Lauder Companies and Dropbox, you can compare the effects of market volatilities on Estee Lauder 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 Estee Lauder with a short position of Dropbox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Dropbox.
Diversification Opportunities for Estee Lauder and Dropbox
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Estee and Dropbox is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Dropbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dropbox and Estee Lauder 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 Estee Lauder Companies 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 Estee Lauder i.e., Estee Lauder and Dropbox go up and down completely randomly.
Pair Corralation between Estee Lauder and Dropbox
Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to generate 2.24 times more return on investment than Dropbox. However, Estee Lauder is 2.24 times more volatile than Dropbox. It trades about 0.39 of its potential returns per unit of risk. Dropbox is currently generating about -0.16 per unit of risk. If you would invest 6,999 in Estee Lauder Companies on April 13, 2025 and sell it today you would earn a total of 2,109 from holding Estee Lauder Companies or generate 30.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Estee Lauder Companies vs. Dropbox
Performance |
| Timeline |
| Estee Lauder Companies |
| Dropbox |
Estee Lauder and Dropbox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Estee Lauder and Dropbox
The main advantage of trading using opposite Estee Lauder and Dropbox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder 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.| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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