Correlation Between Asbury Automotive and Datadog

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

By analyzing existing cross correlation between Asbury Automotive Group and Datadog, you can compare the effects of market volatilities on Asbury Automotive and Datadog 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 Asbury Automotive with a short position of Datadog. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Datadog.

Diversification Opportunities for Asbury Automotive and Datadog

0.67

Correlation Coefficient

Asbury Automotive  Datadog

Poor diversification

The 3 months correlation between Asbury and Datadog is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Asbury Automotive 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 Asbury Automotive Group are associated (or correlated) with Datadog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datadog has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Datadog go up and down completely randomly.

Pair Corralation between Asbury Automotive and Datadog

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Datadog. But the stock apears to be less risky and, when comparing its historical volatility, Asbury Automotive Group is 2.25 times less risky than Datadog. The stock trades about -0.36 of its potential returns per unit of risk. The Datadog is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  15,663  in Datadog on September 24, 2024 and sell it today you would lose (917.00) from holding Datadog or give up 5.85% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  Datadog

Asbury Automotive

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Datadog

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 12 (%) 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.

Pair Trading with Asbury Automotive and Datadog

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

The idea behind Asbury Automotive Group and Datadog 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.