Correlation Between NXP Semiconductors and Datadog

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

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

Diversification Opportunities for NXP Semiconductors and Datadog

-0.2

Correlation Coefficient

NXP Semiconductors  Datadog

Good diversification

The 3 months correlation between NXP and Datadog is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and NXP Semiconductors 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 NXP Semiconductors NV 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 NXP Semiconductors i.e., NXP Semiconductors and Datadog go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Datadog

Given the investment horizon of 90 days NXP Semiconductors is expected to generate 2.18 times less return on investment than Datadog. But when comparing it to its historical volatility, NXP Semiconductors NV is 1.1 times less risky than Datadog. It trades about 0.03 of its potential returns per unit of risk. Datadog is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,204  in Datadog on July 25, 2025 and sell it today you would earn a total of  7,217  from holding Datadog or generate 87.97% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  Datadog

NXP Semiconductors

Risk-Adjusted Performance

Weakest

Over the last 90 days NXP Semiconductors NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, NXP Semiconductors is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Datadog

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Datadog is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NXP Semiconductors and Datadog

The main advantage of trading using opposite NXP Semiconductors and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors 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 NXP Semiconductors NV 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.