Correlation Between Datadog and FAST RETAIL

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

By analyzing existing cross correlation between Datadog and FAST RETAIL ADR, you can compare the effects of market volatilities on Datadog and FAST RETAIL 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 Datadog with a short position of FAST RETAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datadog and FAST RETAIL.

Diversification Opportunities for Datadog and FAST RETAIL

0.67

Correlation Coefficient

Datadog  FAST RETAIL

Poor diversification

The 3 months correlation between Datadog and FAST is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR and Datadog 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 Datadog are associated (or correlated) with FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of Datadog i.e., Datadog and FAST RETAIL go up and down completely randomly.

Pair Corralation between Datadog and FAST RETAIL

Assuming the 90 days horizon Datadog is expected to generate 1.31 times more return on investment than FAST RETAIL. However, Datadog is 1.31 times more volatile than FAST RETAIL ADR. It trades about 0.25 of its potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.16 per unit of risk. If you would invest  9,783  in Datadog on September 15, 2024 and sell it today you would earn a total of  4,817  from holding Datadog or generate 49.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Datadog  vs.  FAST RETAIL ADR

Datadog

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Datadog reported solid returns over the last few months and may actually be approaching a breakup point.

FAST RETAIL ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datadog and FAST RETAIL

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

The idea behind Datadog and FAST RETAIL ADR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.