Correlation Between Datadog and Nintendo

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

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

Diversification Opportunities for Datadog and Nintendo

0.83

Correlation Coefficient

Datadog  Nintendo

Very poor diversification

The 3 months correlation between Datadog and Nintendo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo 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 Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo has no effect on the direction of Datadog i.e., Datadog and Nintendo go up and down completely randomly.

Pair Corralation between Datadog and Nintendo

Assuming the 90 days horizon Datadog is expected to generate 0.96 times more return on investment than Nintendo. However, Datadog is 1.04 times less risky than Nintendo. It trades about 0.06 of its potential returns per unit of risk. Nintendo Co is currently generating about 0.05 per unit of risk. If you would invest  11,216  in Datadog on September 13, 2024 and sell it today you would earn a total of  3,914  from holding Datadog or generate 34.9% return on investment over 90 days.

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

Datadog  vs.  Nintendo Co

Datadog

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 21 (%) 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.

Nintendo

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datadog and Nintendo

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

The idea behind Datadog and Nintendo Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.