Correlation Between Duolingo and EGain

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

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

Diversification Opportunities for Duolingo and EGain

0.27

Correlation Coefficient

Duolingo  EGain

Modest diversification

The 3 months correlation between Duolingo and EGain is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and eGain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eGain 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 EGain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eGain has no effect on the direction of Duolingo i.e., Duolingo and EGain go up and down completely randomly.

Pair Corralation between Duolingo and EGain

Given the investment horizon of 90 days Duolingo is expected to generate 1.27 times more return on investment than EGain. However, Duolingo is 1.27 times more volatile than eGain. It trades about 0.03 of its potential returns per unit of risk. eGain is currently generating about -0.07 per unit of risk. If you would invest  32,520  in Duolingo on December 29, 2024 and sell it today you would earn a total of  774.00  from holding Duolingo or generate 2.38% return on investment over 90 days.

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

Duolingo  vs.  eGain

Duolingo

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duolingo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Duolingo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

eGain

Risk-Adjusted Performance

Very Weak

Over the last 90 days eGain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Duolingo and EGain

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

The idea behind Duolingo and eGain 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..