Correlation Between Nike and Vacasa

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

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

Diversification Opportunities for Nike and Vacasa

0.76

Correlation Coefficient

Nike  Vacasa

Poor diversification

The 3 months correlation between Nike and Vacasa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Vacasa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vacasa Inc and Nike 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 Nike Inc are associated (or correlated) with Vacasa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vacasa Inc has no effect on the direction of Nike i.e., Nike and Vacasa go up and down completely randomly.

Pair Corralation between Nike and Vacasa

Considering the 90-day investment horizon Nike is expected to generate 4.29 times less return on investment than Vacasa. But when comparing it to its historical volatility, Nike Inc is 3.1 times less risky than Vacasa. It trades about 0.11 of its potential returns per unit of risk. Vacasa Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  626.00  in Vacasa Inc on February 7, 2024 and sell it today you would earn a total of  79.00  from holding Vacasa Inc or generate 12.62% return on investment over 90 days.

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

Nike Inc  vs.  Vacasa Inc

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vacasa Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vacasa Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nike and Vacasa

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

The idea behind Nike Inc and Vacasa Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.