Correlation Between Datadog and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Datadog and Silicon Motion 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 Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datadog and Silicon Motion Technology, you can compare the effects of market volatilities on Datadog and Silicon Motion 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 Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datadog and Silicon Motion.
Diversification Opportunities for Datadog and Silicon Motion
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Datadog and Silicon is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology 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 Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Datadog i.e., Datadog and Silicon Motion go up and down completely randomly.
Pair Corralation between Datadog and Silicon Motion
Assuming the 90 days horizon Datadog is expected to generate 1.25 times more return on investment than Silicon Motion. However, Datadog is 1.25 times more volatile than Silicon Motion Technology. It trades about 0.35 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.05 per unit of risk. If you would invest 11,472 in Datadog on September 2, 2024 and sell it today you would earn a total of 2,940 from holding Datadog or generate 25.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datadog vs. Silicon Motion Technology
Performance |
| Timeline |
| Datadog |
| Silicon Motion Technology |
Datadog and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datadog and Silicon Motion
The main advantage of trading using opposite Datadog and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datadog position performs unexpectedly, Silicon Motion 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 Silicon Motion will offset losses from the drop in Silicon Motion's long position.The idea behind Datadog and Silicon Motion Technology 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.| Silicon Motion vs. CVS Health | Silicon Motion vs. Coor Service Management | Silicon Motion vs. Sabra Health Care | Silicon Motion vs. IMPERIAL TOBACCO |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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