Correlation Between Kaiser Aluminum and Datadog

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

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

Diversification Opportunities for Kaiser Aluminum and Datadog

0.27

Correlation Coefficient

Kaiser Aluminum  Datadog

Modest diversification

The 3 months correlation between Kaiser and Datadog is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Datadog go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Datadog

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 1.06 times more return on investment than Datadog. However, Kaiser Aluminum is 1.06 times more volatile than Datadog. It trades about 0.04 of its potential returns per unit of risk. Datadog is currently generating about 0.04 per unit of risk. If you would invest  5,956  in Kaiser Aluminum on October 10, 2024 and sell it today you would earn a total of  1,082  from holding Kaiser Aluminum or generate 18.17% return on investment over 90 days.

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

Kaiser Aluminum  vs.  Datadog

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Datadog

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Datadog may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kaiser Aluminum and Datadog

The main advantage of trading using opposite Kaiser Aluminum and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.