Correlation Between Home Depot and Datadog,

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

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

Diversification Opportunities for Home Depot and Datadog,

0.91

Correlation Coefficient

Home Depot  Datadog,

Almost no diversification

The 3 months correlation between Home and Datadog, is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Datadog, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog, and Home Depot 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 The Home Depot 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 Home Depot i.e., Home Depot and Datadog, go up and down completely randomly.

Pair Corralation between Home Depot and Datadog,

Assuming the 90 days trading horizon Home Depot is expected to generate 1.08 times less return on investment than Datadog,. But when comparing it to its historical volatility, The Home Depot is 1.53 times less risky than Datadog,. It trades about 0.1 of its potential returns per unit of risk. Datadog, is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,622  in Datadog, on October 12, 2024 and sell it today you would earn a total of  2,081  from holding Datadog, or generate 31.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.47%
Values	Daily Returns

The Home Depot  vs.  Datadog,

Home Depot

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Datadog,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Datadog, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and Datadog,

The main advantage of trading using opposite Home Depot and Datadog, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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 The Home Depot 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.