Correlation Between Datadog and Trade Desk

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

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

Diversification Opportunities for Datadog and Trade Desk

-0.24

Correlation Coefficient

Datadog  Trade Desk

Very good diversification

The 3 months correlation between Datadog and Trade is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk and Datadog 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 Datadog are associated (or correlated) with Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Datadog i.e., Datadog and Trade Desk go up and down completely randomly.

Pair Corralation between Datadog and Trade Desk

Given the investment horizon of 90 days Datadog is expected to under-perform the Trade Desk. In addition to that, Datadog is 1.12 times more volatile than Trade Desk. It trades about -0.09 of its total potential returns per unit of risk. Trade Desk is currently generating about 0.09 per unit of volatility. If you would invest  8,345  in Trade Desk on March 4, 2024 and sell it today you would earn a total of  933.00  from holding Trade Desk or generate 11.18% return on investment over 90 days.

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

Datadog  vs.  Trade Desk

Datadog

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datadog has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Trade Desk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trade Desk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Trade Desk may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Datadog and Trade Desk

The main advantage of trading using opposite Datadog and Trade Desk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datadog position performs unexpectedly, Trade Desk 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 Trade Desk will offset losses from the drop in Trade Desk's long position.

The idea behind Datadog and Trade Desk 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .