Correlation Between Tokio Marine and Datadog

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

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

Diversification Opportunities for Tokio Marine and Datadog

-0.32

Correlation Coefficient

Tokio Marine  Datadog

Very good diversification

The 3 months correlation between Tokio and Datadog is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tokio Marine Holdings and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Tokio Marine 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 Tokio Marine Holdings 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 Tokio Marine i.e., Tokio Marine and Datadog go up and down completely randomly.

Pair Corralation between Tokio Marine and Datadog

Assuming the 90 days horizon Tokio Marine Holdings is expected to generate 0.9 times more return on investment than Datadog. However, Tokio Marine Holdings is 1.11 times less risky than Datadog. It trades about 0.07 of its potential returns per unit of risk. Datadog is currently generating about -0.27 per unit of risk. If you would invest  3,370  in Tokio Marine Holdings on December 22, 2024 and sell it today you would earn a total of  279.00  from holding Tokio Marine Holdings or generate 8.28% return on investment over 90 days.

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

Tokio Marine Holdings  vs.  Datadog

Tokio Marine Holdings

Risk-Adjusted Performance

OK

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

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tokio Marine and Datadog

The main advantage of trading using opposite Tokio Marine and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokio Marine 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 Tokio Marine Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.