Correlation Between Datadog and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Datadog and Cardinal Health 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 Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datadog and Cardinal Health, you can compare the effects of market volatilities on Datadog and Cardinal Health 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 Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datadog and Cardinal Health.
Diversification Opportunities for Datadog and Cardinal Health
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Datadog and Cardinal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Datadog i.e., Datadog and Cardinal Health go up and down completely randomly.
Pair Corralation between Datadog and Cardinal Health
Given the investment horizon of 90 days Datadog is expected to generate 1.4 times more return on investment than Cardinal Health. However, Datadog is 1.4 times more volatile than Cardinal Health. It trades about 0.26 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.27 per unit of risk. If you would invest 12,816 in Datadog on August 31, 2024 and sell it today you would earn a total of 2,380 from holding Datadog or generate 18.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datadog vs. Cardinal Health
Performance |
| Timeline |
| Datadog |
| Cardinal Health |
Datadog and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datadog and Cardinal Health
The main advantage of trading using opposite Datadog and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datadog position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.The idea behind Datadog and Cardinal Health 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.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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