Correlation Between Jacobs Solutions and Datadog

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

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

Diversification Opportunities for Jacobs Solutions and Datadog

0.01

Correlation Coefficient

Jacobs Solutions  Datadog

Significant diversification

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

Pair Corralation between Jacobs Solutions and Datadog

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 3.18 times less return on investment than Datadog. But when comparing it to its historical volatility, Jacobs Solutions is 2.27 times less risky than Datadog. It trades about 0.05 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  6,350  in Datadog on September 26, 2024 and sell it today you would earn a total of  8,490  from holding Datadog or generate 133.7% return on investment over 90 days.

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

Jacobs Solutions  vs.  Datadog

Jacobs Solutions

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Datadog

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 13 (%) 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 Jacobs Solutions and Datadog

The main advantage of trading using opposite Jacobs Solutions and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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 Jacobs Solutions 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.