Correlation Between Natuzzi SpA and Liquidity Services

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

By analyzing existing cross correlation between Natuzzi SpA and Liquidity Services, you can compare the effects of market volatilities on Natuzzi SpA and Liquidity Services 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 Liquidity Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natuzzi SpA and Liquidity Services.

Diversification Opportunities for Natuzzi SpA and Liquidity Services

0.41

Correlation Coefficient

Natuzzi SpA  Liquidity Services

Very weak diversification

The 3 months correlation between Natuzzi and Liquidity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Natuzzi SpA and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services 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 Liquidity Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidity Services has no effect on the direction of Natuzzi SpA i.e., Natuzzi SpA and Liquidity Services go up and down completely randomly.

Pair Corralation between Natuzzi SpA and Liquidity Services

Considering the 90-day investment horizon Natuzzi SpA is expected to generate 1.54 times more return on investment than Liquidity Services. However, Natuzzi SpA is 1.54 times more volatile than Liquidity Services. It trades about 0.09 of its potential returns per unit of risk. Liquidity Services is currently generating about 0.01 per unit of risk. If you would invest  400.00  in Natuzzi SpA on December 21, 2024 and sell it today you would earn a total of  69.00  from holding Natuzzi SpA or generate 17.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Natuzzi SpA  vs.  Liquidity Services

Natuzzi SpA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natuzzi SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Natuzzi SpA showed solid returns over the last few months and may actually be approaching a breakup point.

Liquidity Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liquidity Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Liquidity Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Natuzzi SpA and Liquidity Services

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

The idea behind Natuzzi SpA and Liquidity Services 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.