Correlation Between Toast and Datadog

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

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

Diversification Opportunities for Toast and Datadog

0.67

Correlation Coefficient

Toast  Datadog

Poor diversification

The 3 months correlation between Toast and Datadog is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Toast Inc and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Toast 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 Toast Inc 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 Toast i.e., Toast and Datadog go up and down completely randomly.

Pair Corralation between Toast and Datadog

Given the investment horizon of 90 days Toast Inc is expected to under-perform the Datadog. But the stock apears to be less risky and, when comparing its historical volatility, Toast Inc is 1.2 times less risky than Datadog. The stock trades about -0.01 of its potential returns per unit of risk. The Datadog is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,646  in Datadog on May 18, 2025 and sell it today you would earn a total of  1,079  from holding Datadog or generate 9.26% return on investment over 90 days.

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

Toast Inc  vs.  Datadog

Toast Inc

Risk-Adjusted Performance

Weakest

Over the last 90 days Toast Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Toast is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Datadog

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Datadog may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Toast and Datadog

The main advantage of trading using opposite Toast and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toast 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.

The idea behind Toast Inc and Datadog 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.