Correlation Between Deutsche Wohnen and Dropbox

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

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

Diversification Opportunities for Deutsche Wohnen and Dropbox

-0.31

Correlation Coefficient

Deutsche Wohnen  Dropbox

Very good diversification

The 3 months correlation between Deutsche and Dropbox is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Wohnen SE and Dropbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dropbox and Deutsche Wohnen 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 Deutsche Wohnen SE 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 Deutsche Wohnen i.e., Deutsche Wohnen and Dropbox go up and down completely randomly.

Pair Corralation between Deutsche Wohnen and Dropbox

Assuming the 90 days trading horizon Deutsche Wohnen SE is expected to generate 0.69 times more return on investment than Dropbox. However, Deutsche Wohnen SE is 1.46 times less risky than Dropbox. It trades about -0.29 of its potential returns per unit of risk. Dropbox is currently generating about -0.23 per unit of risk. If you would invest  2,400  in Deutsche Wohnen SE on April 22, 2025 and sell it today you would lose (135.00) from holding Deutsche Wohnen SE or give up 5.62% of portfolio value over 90 days.

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

Deutsche Wohnen SE  vs.  Dropbox

Deutsche Wohnen SE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Wohnen SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Deutsche Wohnen is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite nearly stable basic indicators, Dropbox is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Wohnen and Dropbox

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

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.