Correlation Between Cogent Communications and Datadog

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

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

Diversification Opportunities for Cogent Communications and Datadog

-0.08

Correlation Coefficient

Cogent Communications  Datadog

Good diversification

The 3 months correlation between Cogent and Datadog is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Cogent Communications 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 Cogent Communications 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 Cogent Communications i.e., Cogent Communications and Datadog go up and down completely randomly.

Pair Corralation between Cogent Communications and Datadog

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 0.69 times more return on investment than Datadog. However, Cogent Communications Holdings is 1.46 times less risky than Datadog. It trades about -0.1 of its potential returns per unit of risk. Datadog is currently generating about -0.2 per unit of risk. If you would invest  7,200  in Cogent Communications Holdings on October 20, 2024 and sell it today you would lose (200.00) from holding Cogent Communications Holdings or give up 2.78% of portfolio value over 90 days.

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

Cogent Communications Holdings  vs.  Datadog

Cogent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Datadog

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Datadog reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and Datadog

The main advantage of trading using opposite Cogent Communications and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications 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 Cogent Communications 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.