Correlation Between Duolingo and Grab Holdings

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

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

Diversification Opportunities for Duolingo and Grab Holdings

0.65

Correlation Coefficient

Duolingo  Grab Holdings

Poor diversification

The 3 months correlation between Duolingo and Grab is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and Grab Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grab Holdings 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 Grab Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grab Holdings has no effect on the direction of Duolingo i.e., Duolingo and Grab Holdings go up and down completely randomly.

Pair Corralation between Duolingo and Grab Holdings

Given the investment horizon of 90 days Duolingo is expected to generate 1.09 times more return on investment than Grab Holdings. However, Duolingo is 1.09 times more volatile than Grab Holdings. It trades about 0.03 of its potential returns per unit of risk. Grab Holdings is currently generating about 0.0 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	Significant
Accuracy	100.0%
Values	Daily Returns

Duolingo  vs.  Grab Holdings

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.

Grab Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grab Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grab Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duolingo and Grab Holdings

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

The idea behind Duolingo and Grab Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.