Correlation Between Alibaba Health and Datadog

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

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

Diversification Opportunities for Alibaba Health and Datadog

-0.5

Correlation Coefficient

Alibaba Health  Datadog

Very good diversification

The 3 months correlation between Alibaba and Datadog is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Health Information and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog and Alibaba Health 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 Alibaba Health Information 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 Alibaba Health i.e., Alibaba Health and Datadog go up and down completely randomly.

Pair Corralation between Alibaba Health and Datadog

Assuming the 90 days horizon Alibaba Health is expected to generate 10.52 times less return on investment than Datadog. In addition to that, Alibaba Health is 1.09 times more volatile than Datadog. It trades about 0.02 of its total potential returns per unit of risk. Datadog is currently generating about 0.19 per unit of volatility. If you would invest  8,706  in Datadog on April 24, 2025 and sell it today you would earn a total of  3,700  from holding Datadog or generate 42.5% return on investment over 90 days.

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

Alibaba Health Information  vs.  Datadog

Alibaba Health Infor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Health Information are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alibaba Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Datadog

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Datadog are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Datadog reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Health and Datadog

The main advantage of trading using opposite Alibaba Health and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Health 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 Alibaba Health Information 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.