Correlation Between Infosys and Datadog

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

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

Diversification Opportunities for Infosys and Datadog

0.69

Correlation Coefficient

Infosys  Datadog

Poor diversification

The 3 months correlation between Infosys and Datadog is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Infosys 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 Infosys Ltd ADR 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 Infosys i.e., Infosys and Datadog go up and down completely randomly.

Pair Corralation between Infosys and Datadog

Given the investment horizon of 90 days Infosys Ltd ADR is expected to generate 0.34 times more return on investment than Datadog. However, Infosys Ltd ADR is 2.96 times less risky than Datadog. It trades about -0.2 of its potential returns per unit of risk. Datadog is currently generating about -0.54 per unit of risk. If you would invest  2,153  in Infosys Ltd ADR on November 29, 2024 and sell it today you would lose (76.00) from holding Infosys Ltd ADR or give up 3.53% of portfolio value over 90 days.

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

Infosys Ltd ADR  vs.  Datadog

Infosys Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Infosys and Datadog

The main advantage of trading using opposite Infosys and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys 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 Infosys Ltd ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.