Correlation Between Martin Marietta and Datadog
Can any of the company-specific risk be diversified away by investing in both Martin Marietta 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 Martin Marietta and Datadog into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Martin Marietta Materials and Datadog, you can compare the effects of market volatilities on Martin Marietta 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 Martin Marietta with a short position of Datadog. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Datadog.
Diversification Opportunities for Martin Marietta and Datadog
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Martin and Datadog is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Martin Marietta 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 Martin Marietta Materials 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 Martin Marietta i.e., Martin Marietta and Datadog go up and down completely randomly.
Pair Corralation between Martin Marietta and Datadog
Assuming the 90 days trading horizon Martin Marietta is expected to generate 3.66 times less return on investment than Datadog. But when comparing it to its historical volatility, Martin Marietta Materials is 2.05 times less risky than Datadog. It trades about 0.19 of its potential returns per unit of risk. Datadog is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 11,768 in Datadog on August 29, 2024 and sell it today you would earn a total of 3,066 from holding Datadog or generate 26.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. Datadog
Performance |
| Timeline |
| Martin Marietta Materials |
| Datadog |
Martin Marietta and Datadog Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Datadog
The main advantage of trading using opposite Martin Marietta and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta 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.| Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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