Correlation Between Grocery Outlet and Datadog

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

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

Diversification Opportunities for Grocery Outlet and Datadog

0.57

Correlation Coefficient

Grocery Outlet  Datadog

Very weak diversification

The 3 months correlation between Grocery and Datadog is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Grocery Outlet 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 Grocery Outlet 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 Grocery Outlet i.e., Grocery Outlet and Datadog go up and down completely randomly.

Pair Corralation between Grocery Outlet and Datadog

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Datadog. In addition to that, Grocery Outlet is 1.1 times more volatile than Datadog. It trades about -0.45 of its total potential returns per unit of risk. Datadog is currently generating about -0.1 per unit of volatility. If you would invest  15,663  in Datadog on September 24, 2024 and sell it today you would lose (917.00) from holding Datadog or give up 5.85% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  Datadog

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Datadog

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Datadog reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grocery Outlet and Datadog

The main advantage of trading using opposite Grocery Outlet and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.