Correlation Between Datadog and ODDITY Tech

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

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

Diversification Opportunities for Datadog and ODDITY Tech

0.11

Correlation Coefficient

Datadog  ODDITY Tech

Average diversification

The 3 months correlation between Datadog and ODDITY is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech 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 ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of Datadog i.e., Datadog and ODDITY Tech go up and down completely randomly.

Pair Corralation between Datadog and ODDITY Tech

Given the investment horizon of 90 days Datadog is expected to under-perform the ODDITY Tech. But the stock apears to be less risky and, when comparing its historical volatility, Datadog is 1.11 times less risky than ODDITY Tech. The stock trades about -0.22 of its potential returns per unit of risk. The ODDITY Tech Ltd is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,458  in ODDITY Tech Ltd on December 22, 2024 and sell it today you would lose (126.00) from holding ODDITY Tech Ltd or give up 2.83% of portfolio value over 90 days.

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

Datadog  vs.  ODDITY Tech Ltd

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.

ODDITY Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ODDITY Tech Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ODDITY Tech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Datadog and ODDITY Tech

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

The idea behind Datadog and ODDITY Tech Ltd 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.