Correlation Between Alibaba Group and Datadog,

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

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

Diversification Opportunities for Alibaba Group and Datadog,

-0.67

Correlation Coefficient

Alibaba Group  Datadog,

Excellent diversification

The 3 months correlation between Alibaba and Datadog, is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Datadog, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog, and Alibaba Group 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 Alibaba Group Holding 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 Alibaba Group i.e., Alibaba Group and Datadog, go up and down completely randomly.

Pair Corralation between Alibaba Group and Datadog,

Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the Datadog,. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 1.32 times less risky than Datadog,. The stock trades about -0.03 of its potential returns per unit of risk. The Datadog, is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,077  in Datadog, on October 7, 2024 and sell it today you would earn a total of  1,825  from holding Datadog, or generate 25.79% return on investment over 90 days.

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

Alibaba Group Holding  vs.  Datadog,

Alibaba Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alibaba Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Datadog,

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog, are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Datadog, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Datadog,

The main advantage of trading using opposite Alibaba Group and Datadog, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group 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 Alibaba Group Holding 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.

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.