Correlation Between Duolingo and SentinelOne

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

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

Diversification Opportunities for Duolingo and SentinelOne

-0.55

Correlation Coefficient

Duolingo  SentinelOne

Excellent diversification

The 3 months correlation between Duolingo and SentinelOne is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Duolingo and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne 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 SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of Duolingo i.e., Duolingo and SentinelOne go up and down completely randomly.

Pair Corralation between Duolingo and SentinelOne

Given the investment horizon of 90 days Duolingo is expected to generate 1.43 times more return on investment than SentinelOne. However, Duolingo is 1.43 times more volatile than SentinelOne. It trades about 0.06 of its potential returns per unit of risk. SentinelOne is currently generating about -0.16 per unit of risk. If you would invest  21,821  in Duolingo on February 1, 2024 and sell it today you would earn a total of  754.00  from holding Duolingo or generate 3.46% 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.  SentinelOne

Duolingo

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duolingo are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Duolingo disclosed solid returns over the last few months and may actually be approaching a breakup point.

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Duolingo and SentinelOne

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

The idea behind Duolingo and SentinelOne 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.