Correlation Between Natuzzi SpA and Purple Innovation
Can any of the company-specific risk be diversified away by investing in both Natuzzi SpA and Purple Innovation 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 Natuzzi SpA and Purple Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natuzzi SpA and Purple Innovation, you can compare the effects of market volatilities on Natuzzi SpA and Purple Innovation 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 Natuzzi SpA with a short position of Purple Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natuzzi SpA and Purple Innovation.
Diversification Opportunities for Natuzzi SpA and Purple Innovation
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Natuzzi and Purple is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Natuzzi SpA and Purple Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Innovation and Natuzzi SpA 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 Natuzzi SpA are associated (or correlated) with Purple Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Innovation has no effect on the direction of Natuzzi SpA i.e., Natuzzi SpA and Purple Innovation go up and down completely randomly.
Pair Corralation between Natuzzi SpA and Purple Innovation
Considering the 90-day investment horizon Natuzzi SpA is expected to generate 0.62 times more return on investment than Purple Innovation. However, Natuzzi SpA is 1.6 times less risky than Purple Innovation. It trades about -0.03 of its potential returns per unit of risk. Purple Innovation is currently generating about -0.33 per unit of risk. If you would invest 502.00 in Natuzzi SpA on November 25, 2024 and sell it today you would lose (12.00) from holding Natuzzi SpA or give up 2.39% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Natuzzi SpA vs. Purple Innovation
Performance |
Timeline |
Natuzzi SpA |
Purple Innovation |
Natuzzi SpA and Purple Innovation Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Natuzzi SpA and Purple Innovation
The main advantage of trading using opposite Natuzzi SpA and Purple Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natuzzi SpA position performs unexpectedly, Purple Innovation 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 Purple Innovation will offset losses from the drop in Purple Innovation's long position.Natuzzi SpA vs. Bassett Furniture Industries | ||
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Check out your portfolio center.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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