Correlation Between Duolingo and AudioEye

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

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

Diversification Opportunities for Duolingo and AudioEye

0.67

Correlation Coefficient

Duolingo  AudioEye

Poor diversification

The 3 months correlation between Duolingo and AudioEye is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and AudioEye in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioEye and Duolingo 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 Duolingo are associated (or correlated) with AudioEye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioEye has no effect on the direction of Duolingo i.e., Duolingo and AudioEye go up and down completely randomly.

Pair Corralation between Duolingo and AudioEye

Given the investment horizon of 90 days Duolingo is expected to generate 0.41 times more return on investment than AudioEye. However, Duolingo is 2.41 times less risky than AudioEye. It trades about 0.38 of its potential returns per unit of risk. AudioEye is currently generating about 0.09 per unit of risk. If you would invest  20,636  in Duolingo on September 3, 2024 and sell it today you would earn a total of  14,191  from holding Duolingo or generate 68.77% return on investment over 90 days.

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

Duolingo  vs.  AudioEye

Duolingo

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Duolingo are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Duolingo disclosed solid returns over the last few months and may actually be approaching a breakup point.

AudioEye

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AudioEye are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AudioEye exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duolingo and AudioEye

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

The idea behind Duolingo and AudioEye 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.