Correlation Between Duolingo and China Construction
Can any of the company-specific risk be diversified away by investing in both Duolingo and China Construction 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 China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duolingo and China Construction Bank, you can compare the effects of market volatilities on Duolingo and China Construction 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 China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duolingo and China Construction.
Diversification Opportunities for Duolingo and China Construction
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Duolingo and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank 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 China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of Duolingo i.e., Duolingo and China Construction go up and down completely randomly.
Pair Corralation between Duolingo and China Construction
Given the investment horizon of 90 days Duolingo is expected to generate 0.68 times more return on investment than China Construction. However, Duolingo is 1.47 times less risky than China Construction. It trades about 0.17 of its potential returns per unit of risk. China Construction Bank is currently generating about 0.05 per unit of risk. If you would invest 19,416 in Duolingo on August 24, 2024 and sell it today you would earn a total of 14,744 from holding Duolingo or generate 75.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.8% |
| Values | Daily Returns |
Duolingo vs. China Construction Bank
Performance |
| Timeline |
| Duolingo |
| China Construction Bank |
Duolingo and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duolingo and China Construction
The main advantage of trading using opposite Duolingo and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duolingo position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.The idea behind Duolingo and China Construction Bank 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.| China Construction vs. Svenska Handelsbanken PK | China Construction vs. ANZ Group Holdings | China Construction vs. Westpac Banking | China Construction vs. National Australia Bank |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Stocks Directory Find actively traded stocks across global markets | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |