Correlation Between Datadog and Freshworks

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

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

Diversification Opportunities for Datadog and Freshworks

0.9

Correlation Coefficient

Datadog  Freshworks

Almost no diversification

The 3 months correlation between Datadog and Freshworks is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Freshworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshworks 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 Freshworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshworks has no effect on the direction of Datadog i.e., Datadog and Freshworks go up and down completely randomly.

Pair Corralation between Datadog and Freshworks

Given the investment horizon of 90 days Datadog is expected to generate 0.83 times more return on investment than Freshworks. However, Datadog is 1.2 times less risky than Freshworks. It trades about 0.22 of its potential returns per unit of risk. Freshworks is currently generating about 0.17 per unit of risk. If you would invest  9,744  in Datadog on February 8, 2025 and sell it today you would earn a total of  1,049  from holding Datadog or generate 10.77% return on investment over 90 days.

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

Datadog  vs.  Freshworks

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 unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Freshworks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freshworks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Datadog and Freshworks

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

The idea behind Datadog and Freshworks 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.