Correlation Between Datadog and PENINSULA ENERG

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

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

Diversification Opportunities for Datadog and PENINSULA ENERG

0.82

Correlation Coefficient

Datadog  PENINSULA ENERG

Very poor diversification

The 3 months correlation between Datadog and PENINSULA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and PENINSULA ENERG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENINSULA ENERG 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 PENINSULA ENERG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENINSULA ENERG has no effect on the direction of Datadog i.e., Datadog and PENINSULA ENERG go up and down completely randomly.

Pair Corralation between Datadog and PENINSULA ENERG

Assuming the 90 days horizon Datadog is expected to generate 0.46 times more return on investment than PENINSULA ENERG. However, Datadog is 2.18 times less risky than PENINSULA ENERG. It trades about -0.27 of its potential returns per unit of risk. PENINSULA ENERG is currently generating about -0.15 per unit of risk. If you would invest  14,428  in Datadog on December 23, 2024 and sell it today you would lose (4,906) from holding Datadog or give up 34.0% of portfolio value over 90 days.

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

Datadog  vs.  PENINSULA ENERG

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.

PENINSULA ENERG

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENINSULA ENERG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Datadog and PENINSULA ENERG

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

The idea behind Datadog and PENINSULA ENERG 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.