Correlation Between FAST RETAIL and Datadog

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

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

Diversification Opportunities for FAST RETAIL and Datadog

0.67

Correlation Coefficient

FAST RETAIL  Datadog

Poor diversification

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

Pair Corralation between FAST RETAIL and Datadog

Assuming the 90 days trading horizon FAST RETAIL is expected to generate 2.08 times less return on investment than Datadog. But when comparing it to its historical volatility, FAST RETAIL ADR is 1.31 times less risky than Datadog. It trades about 0.16 of its potential returns per unit of risk. Datadog is currently generating about 0.25 of returns per unit of risk over similar time horizon. 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

FAST RETAIL ADR  vs.  Datadog

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.

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.

Pair Trading with FAST RETAIL and Datadog

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

The idea behind FAST RETAIL ADR and Datadog 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.