Correlation Between Datadog and NISOURCE

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

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

Diversification Opportunities for Datadog and NISOURCE

0.25

Correlation Coefficient

Datadog  NISOURCE

Modest diversification

The 3 months correlation between Datadog and NISOURCE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN P 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE FIN P has no effect on the direction of Datadog i.e., Datadog and NISOURCE go up and down completely randomly.

Pair Corralation between Datadog and NISOURCE

Given the investment horizon of 90 days Datadog is expected to under-perform the NISOURCE. In addition to that, Datadog is 2.38 times more volatile than NISOURCE FIN P. It trades about -0.18 of its total potential returns per unit of risk. NISOURCE FIN P is currently generating about 0.12 per unit of volatility. If you would invest  9,317  in NISOURCE FIN P on December 25, 2024 and sell it today you would earn a total of  543.00  from holding NISOURCE FIN P or generate 5.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.27%
Values	Daily Returns

Datadog  vs.  NISOURCE FIN P

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.

NISOURCE FIN P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NISOURCE FIN P are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, NISOURCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Datadog and NISOURCE

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

The idea behind Datadog and NISOURCE FIN P 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.