Correlation Between Vacasa and S A P

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

By analyzing existing cross correlation between Vacasa Inc and SAP SE ADR, you can compare the effects of market volatilities on Vacasa and S A P 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 Vacasa with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vacasa and S A P.

Diversification Opportunities for Vacasa and S A P

0.61

Correlation Coefficient

Vacasa  S A P

Poor diversification

The 3 months correlation between Vacasa and SAP is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vacasa Inc and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR and Vacasa 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 Vacasa Inc are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE ADR has no effect on the direction of Vacasa i.e., Vacasa and S A P go up and down completely randomly.

Pair Corralation between Vacasa and S A P

Given the investment horizon of 90 days Vacasa Inc is expected to generate 2.1 times more return on investment than S A P. However, Vacasa is 2.1 times more volatile than SAP SE ADR. It trades about 0.17 of its potential returns per unit of risk. SAP SE ADR is currently generating about 0.07 per unit of risk. If you would invest  381.00  in Vacasa Inc on December 27, 2024 and sell it today you would earn a total of  160.00  from holding Vacasa Inc or generate 41.99% return on investment over 90 days.

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

Vacasa Inc  vs.  SAP SE ADR

Vacasa Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vacasa Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Vacasa sustained solid returns over the last few months and may actually be approaching a breakup point.

SAP SE ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vacasa and S A P

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

The idea behind Vacasa Inc and SAP SE ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.