Correlation Between Datadog and Ramaco Resources

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

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

Diversification Opportunities for Datadog and Ramaco Resources

-0.18

Correlation Coefficient

Datadog  Ramaco Resources

Good diversification

The 3 months correlation between Datadog and Ramaco is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources 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 Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Datadog i.e., Datadog and Ramaco Resources go up and down completely randomly.

Pair Corralation between Datadog and Ramaco Resources

Given the investment horizon of 90 days Datadog is expected to under-perform the Ramaco Resources. But the stock apears to be less risky and, when comparing its historical volatility, Datadog is 2.3 times less risky than Ramaco Resources. The stock trades about -0.22 of its potential returns per unit of risk. The Ramaco Resources is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  959.00  in Ramaco Resources on October 25, 2024 and sell it today you would lose (41.00) from holding Ramaco Resources or give up 4.28% of portfolio value over 90 days.

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

Datadog  vs.  Ramaco Resources

Datadog

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Datadog reported solid returns over the last few months and may actually be approaching a breakup point.

Ramaco Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Ramaco Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Datadog and Ramaco Resources

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

The idea behind Datadog and Ramaco Resources 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 Managers module to screen money managers from public funds and ETFs managed around the world.