Correlation Between Duolingo and Braze
Can any of the company-specific risk be diversified away by investing in both Duolingo and Braze 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 Braze into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duolingo and Braze Inc, you can compare the effects of market volatilities on Duolingo and Braze 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 Braze. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duolingo and Braze.
Diversification Opportunities for Duolingo and Braze
Excellent diversification
The 3 months correlation between Duolingo and Braze is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and Braze Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braze Inc 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 Braze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braze Inc has no effect on the direction of Duolingo i.e., Duolingo and Braze go up and down completely randomly.
Pair Corralation between Duolingo and Braze
Given the investment horizon of 90 days Duolingo is expected to generate 1.15 times more return on investment than Braze. However, Duolingo is 1.15 times more volatile than Braze Inc. It trades about 0.08 of its potential returns per unit of risk. Braze Inc is currently generating about -0.03 per unit of risk. If you would invest 21,229 in Duolingo on August 26, 2024 and sell it today you would earn a total of 13,968 from holding Duolingo or generate 65.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Duolingo vs. Braze Inc
Performance |
| Timeline |
| Duolingo |
| Braze Inc |
Duolingo and Braze Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duolingo and Braze
The main advantage of trading using opposite Duolingo and Braze positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duolingo position performs unexpectedly, Braze 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 Braze will offset losses from the drop in Braze's long position.The idea behind Duolingo and Braze Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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