Correlation Between Datadog and Apple

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

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

Diversification Opportunities for Datadog and Apple

0.92

Correlation Coefficient

Datadog  Apple

Almost no diversification

The 3 months correlation between Datadog and Apple is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Datadog i.e., Datadog and Apple go up and down completely randomly.

Pair Corralation between Datadog and Apple

Assuming the 90 days horizon Datadog is expected to generate 2.31 times more return on investment than Apple. However, Datadog is 2.31 times more volatile than Apple Inc. It trades about 0.22 of its potential returns per unit of risk. Apple Inc is currently generating about 0.23 per unit of risk. If you would invest  10,354  in Datadog on September 19, 2024 and sell it today you would earn a total of  4,146  from holding Datadog or generate 40.04% return on investment over 90 days.

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

Datadog  vs.  Apple Inc

Datadog

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 17 (%) 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.

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datadog and Apple

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

The idea behind Datadog and Apple Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..