Correlation Between Datadog and Domino’s Pizza

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

By analyzing existing cross correlation between Datadog and Dominos Pizza Group, you can compare the effects of market volatilities on Datadog and Domino’s Pizza 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 Domino’s Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datadog and Domino’s Pizza.

Diversification Opportunities for Datadog and Domino’s Pizza

-0.3

Correlation Coefficient

Datadog  Domino’s Pizza

Very good diversification

The 3 months correlation between Datadog and Domino’s is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Group 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 Domino’s Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Group has no effect on the direction of Datadog i.e., Datadog and Domino’s Pizza go up and down completely randomly.

Pair Corralation between Datadog and Domino’s Pizza

Given the investment horizon of 90 days Datadog is expected to under-perform the Domino’s Pizza. In addition to that, Datadog is 1.35 times more volatile than Dominos Pizza Group. It trades about -0.23 of its total potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.01 per unit of volatility. If you would invest  788.00  in Dominos Pizza Group on December 20, 2024 and sell it today you would lose (3.00) from holding Dominos Pizza Group or give up 0.38% of portfolio value over 90 days.

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

Datadog  vs.  Dominos Pizza Group

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 weak 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.

Dominos Pizza Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dominos Pizza Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Domino’s Pizza is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Datadog and Domino’s Pizza

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

The idea behind Datadog and Dominos Pizza Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.