Correlation Between Datadog and Elastic NV

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

By analyzing existing cross correlation between Datadog and Elastic NV, you can compare the effects of market volatilities on Datadog and Elastic NV 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 Elastic NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datadog and Elastic NV.

Diversification Opportunities for Datadog and Elastic NV

0.89

Correlation Coefficient

Datadog  Elastic NV

Very poor diversification

The 3 months correlation between Datadog and Elastic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Elastic NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elastic NV 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 Elastic NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elastic NV has no effect on the direction of Datadog i.e., Datadog and Elastic NV go up and down completely randomly.

Pair Corralation between Datadog and Elastic NV

Given the investment horizon of 90 days Datadog is expected to under-perform the Elastic NV. But the stock apears to be less risky and, when comparing its historical volatility, Datadog is 1.35 times less risky than Elastic NV. The stock trades about -0.14 of its potential returns per unit of risk. The Elastic NV is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  10,492  in Elastic NV on January 27, 2025 and sell it today you would lose (2,070) from holding Elastic NV or give up 19.73% of portfolio value over 90 days.

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

Datadog  vs.  Elastic NV

Datadog

Risk-Adjusted Performance

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 May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Elastic NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elastic NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Datadog and Elastic NV

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

The idea behind Datadog and Elastic NV 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.