Correlation Between American Healthcare and Datadog

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

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

Diversification Opportunities for American Healthcare and Datadog

0.83

Correlation Coefficient

American Healthcare  Datadog

Very poor diversification

The 3 months correlation between American and Datadog is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT, and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and American Healthcare 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 American Healthcare REIT, 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 American Healthcare i.e., American Healthcare and Datadog go up and down completely randomly.

Pair Corralation between American Healthcare and Datadog

Considering the 90-day investment horizon American Healthcare REIT, is expected to generate 0.49 times more return on investment than Datadog. However, American Healthcare REIT, is 2.03 times less risky than Datadog. It trades about -0.15 of its potential returns per unit of risk. Datadog is currently generating about -0.1 per unit of risk. If you would invest  2,896  in American Healthcare REIT, on September 25, 2024 and sell it today you would lose (121.00) from holding American Healthcare REIT, or give up 4.18% of portfolio value over 90 days.

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

American Healthcare REIT,  vs.  Datadog

American Healthcare REIT,

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, American Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 American Healthcare and Datadog

The main advantage of trading using opposite American Healthcare and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Healthcare 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 American Healthcare REIT, 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.