Correlation Between Momentive Global and Duolingo

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

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

Diversification Opportunities for Momentive Global and Duolingo

0.41

Correlation Coefficient

Momentive Global  Duolingo

Very weak diversification

The 3 months correlation between Momentive and Duolingo is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Momentive Global and Duolingo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duolingo and Momentive Global 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 Momentive Global are associated (or correlated) with Duolingo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duolingo has no effect on the direction of Momentive Global i.e., Momentive Global and Duolingo go up and down completely randomly.

Pair Corralation between Momentive Global and Duolingo

If you would invest  16,595  in Duolingo on September 26, 2024 and sell it today you would earn a total of  17,444  from holding Duolingo or generate 105.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.32%
Values	Daily Returns

Momentive Global  vs.  Duolingo

Momentive Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Momentive Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Momentive Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Duolingo

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Duolingo are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Duolingo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Momentive Global and Duolingo

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

The idea behind Momentive Global and Duolingo 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.