Correlation Between Datadog and Darden Restaurants

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

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

Diversification Opportunities for Datadog and Darden Restaurants

-0.1

Correlation Coefficient

Datadog  Darden Restaurants

Good diversification

The 3 months correlation between Datadog and Darden is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Datadog i.e., Datadog and Darden Restaurants go up and down completely randomly.

Pair Corralation between Datadog and Darden Restaurants

Assuming the 90 days horizon Datadog is expected to under-perform the Darden Restaurants. In addition to that, Datadog is 1.67 times more volatile than Darden Restaurants. It trades about -0.27 of its total potential returns per unit of risk. Darden Restaurants is currently generating about -0.04 per unit of volatility. If you would invest  17,858  in Darden Restaurants on December 22, 2024 and sell it today you would lose (703.00) from holding Darden Restaurants or give up 3.94% of portfolio value over 90 days.

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

Datadog  vs.  Darden Restaurants

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 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.

Darden Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Darden Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Datadog and Darden Restaurants

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

The idea behind Datadog and Darden Restaurants 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.