Correlation Between Natuzzi SpA and La Z

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

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

Diversification Opportunities for Natuzzi SpA and La Z

0.34

Correlation Coefficient

Natuzzi SpA  La Z

Weak diversification

The 3 months correlation between Natuzzi and LZB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Natuzzi SpA and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Z Boy 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 La Z. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Z Boy has no effect on the direction of Natuzzi SpA i.e., Natuzzi SpA and La Z go up and down completely randomly.

Pair Corralation between Natuzzi SpA and La Z

Considering the 90-day investment horizon Natuzzi SpA is expected to generate 1.62 times more return on investment than La Z. However, Natuzzi SpA is 1.62 times more volatile than La Z Boy Incorporated. It trades about 0.1 of its potential returns per unit of risk. La Z Boy Incorporated is currently generating about -0.05 per unit of risk. If you would invest  444.00  in Natuzzi SpA on December 27, 2024 and sell it today you would earn a total of  76.00  from holding Natuzzi SpA or generate 17.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Natuzzi SpA  vs.  La Z Boy Incorporated

Natuzzi SpA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natuzzi SpA are ranked lower than 7 (%) 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.

La Z Boy

Risk-Adjusted Performance

Very Weak

Over the last 90 days La Z Boy Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, La Z is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Natuzzi SpA and La Z

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

The idea behind Natuzzi SpA and La Z Boy Incorporated 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.