Correlation Between Highway Holdings and Datadog

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

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

Diversification Opportunities for Highway Holdings and Datadog

0.01

Correlation Coefficient

Highway Holdings  Datadog

Significant diversification

The 3 months correlation between Highway and Datadog is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Highway Holdings 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 Highway Holdings Limited 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 Highway Holdings i.e., Highway Holdings and Datadog go up and down completely randomly.

Pair Corralation between Highway Holdings and Datadog

Given the investment horizon of 90 days Highway Holdings is expected to generate 4.64 times less return on investment than Datadog. In addition to that, Highway Holdings is 1.11 times more volatile than Datadog. It trades about 0.01 of its total potential returns per unit of risk. Datadog is currently generating about 0.05 per unit of volatility. If you would invest  12,138  in Datadog on September 24, 2024 and sell it today you would earn a total of  2,808  from holding Datadog or generate 23.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Highway Holdings Limited  vs.  Datadog

Highway Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Highway Holdings and Datadog

The main advantage of trading using opposite Highway Holdings and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings 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 Highway Holdings Limited 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.