Correlation Between Duolingo and Workiva

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

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

Diversification Opportunities for Duolingo and Workiva

0.84

Correlation Coefficient

Duolingo  Workiva

Very poor diversification

The 3 months correlation between Duolingo and Workiva is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva 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 Workiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workiva has no effect on the direction of Duolingo i.e., Duolingo and Workiva go up and down completely randomly.

Pair Corralation between Duolingo and Workiva

Given the investment horizon of 90 days Duolingo is expected to generate 1.17 times more return on investment than Workiva. However, Duolingo is 1.17 times more volatile than Workiva. It trades about 0.38 of its potential returns per unit of risk. Workiva is currently generating about 0.23 per unit of risk. If you would invest  20,636  in Duolingo on September 1, 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	Strong
Accuracy	100.0%
Values	Daily Returns

Duolingo  vs.  Workiva

Duolingo

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Duolingo are ranked lower than 30 (%) 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.

Workiva

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Workiva are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Workiva disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duolingo and Workiva

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

The idea behind Duolingo and Workiva 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.