Correlation Between Datadog and Shopify

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

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

Diversification Opportunities for Datadog and Shopify

0.92

Correlation Coefficient

Datadog  Shopify

Almost no diversification

The 3 months correlation between Datadog and Shopify is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Datadog and Shopify Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify Class A 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify Class A has no effect on the direction of Datadog i.e., Datadog and Shopify go up and down completely randomly.

Pair Corralation between Datadog and Shopify

Given the investment horizon of 90 days Datadog is expected to generate 0.84 times more return on investment than Shopify. However, Datadog is 1.19 times less risky than Shopify. It trades about 0.31 of its potential returns per unit of risk. Shopify Class A is currently generating about 0.24 per unit of risk. If you would invest  8,892  in Datadog on April 20, 2025 and sell it today you would earn a total of  5,610  from holding Datadog or generate 63.09% 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.  Shopify Class A

Datadog

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Datadog reported solid returns over the last few months and may actually be approaching a breakup point.

Shopify Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datadog and Shopify

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

The idea behind Datadog and Shopify Class A 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.