Correlation Between Datadog and M/I Homes

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

By analyzing existing cross correlation between Datadog and MI Homes, you can compare the effects of market volatilities on Datadog and M/I Homes 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 M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datadog and M/I Homes.

Diversification Opportunities for Datadog and M/I Homes

0.77

Correlation Coefficient

Datadog  M/I Homes

Poor diversification

The 3 months correlation between Datadog and M/I is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes 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 M/I Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M/I Homes has no effect on the direction of Datadog i.e., Datadog and M/I Homes go up and down completely randomly.

Pair Corralation between Datadog and M/I Homes

Assuming the 90 days horizon Datadog is expected to under-perform the M/I Homes. In addition to that, Datadog is 1.32 times more volatile than MI Homes. It trades about -0.24 of its total potential returns per unit of risk. MI Homes is currently generating about -0.19 per unit of volatility. If you would invest  13,100  in MI Homes on December 20, 2024 and sell it today you would lose (2,620) from holding MI Homes or give up 20.0% of portfolio value over 90 days.

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

Datadog  vs.  MI Homes

Datadog

Risk-Adjusted Performance

Very Weak

Over the last 90 days Datadog has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

M/I Homes

Risk-Adjusted Performance

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Datadog and M/I Homes

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

The idea behind Datadog and MI Homes 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.