Correlation Between Duolingo and EZFL Old

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

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

Diversification Opportunities for Duolingo and EZFL Old

0.15

Correlation Coefficient

Duolingo  EZFL Old

Average diversification

The 3 months correlation between Duolingo and EZFL is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and EZFL Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZFL Old 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 EZFL Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZFL Old has no effect on the direction of Duolingo i.e., Duolingo and EZFL Old go up and down completely randomly.

Pair Corralation between Duolingo and EZFL Old

Given the investment horizon of 90 days Duolingo is expected to generate 10.15 times less return on investment than EZFL Old. But when comparing it to its historical volatility, Duolingo is 1.72 times less risky than EZFL Old. It trades about 0.01 of its potential returns per unit of risk. EZFL Old is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  332.00  in EZFL Old on December 29, 2024 and sell it today you would earn a total of  18.00  from holding EZFL Old or generate 5.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.46%
Values	Daily Returns

Duolingo  vs.  EZFL Old

Duolingo

Risk-Adjusted Performance

Weak

Over the last 90 days Duolingo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Duolingo is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

EZFL Old

Risk-Adjusted Performance

Insignificant

Over the last 90 days EZFL Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite conflicting technical and fundamental indicators, EZFL Old disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duolingo and EZFL Old

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

The idea behind Duolingo and EZFL Old 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.