Correlation Between Sankyo and Datadog

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

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

Diversification Opportunities for Sankyo and Datadog

0.15

Correlation Coefficient

Sankyo  Datadog

Average diversification

The 3 months correlation between Sankyo and Datadog is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sankyo Co and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Sankyo 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 Sankyo Co 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 Sankyo i.e., Sankyo and Datadog go up and down completely randomly.

Pair Corralation between Sankyo and Datadog

Assuming the 90 days horizon Sankyo Co is expected to generate 0.49 times more return on investment than Datadog. However, Sankyo Co is 2.03 times less risky than Datadog. It trades about -0.1 of its potential returns per unit of risk. Datadog is currently generating about -0.06 per unit of risk. If you would invest  1,290  in Sankyo Co on September 26, 2024 and sell it today you would lose (40.00) from holding Sankyo Co or give up 3.1% of portfolio value over 90 days.

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

Sankyo Co  vs.  Datadog

Sankyo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sankyo Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sankyo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Datadog

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 15 (%) 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 Sankyo and Datadog

The main advantage of trading using opposite Sankyo and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sankyo 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 Sankyo Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.