Correlation Between Natuzzi SpA and MasterBrand

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

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

Diversification Opportunities for Natuzzi SpA and MasterBrand

0.36

Correlation Coefficient

Natuzzi SpA  MasterBrand

Weak diversification

The 3 months correlation between Natuzzi and MasterBrand is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Natuzzi SpA and MasterBrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasterBrand 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 MasterBrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasterBrand has no effect on the direction of Natuzzi SpA i.e., Natuzzi SpA and MasterBrand go up and down completely randomly.

Pair Corralation between Natuzzi SpA and MasterBrand

Considering the 90-day investment horizon Natuzzi SpA is expected to generate 1.37 times more return on investment than MasterBrand. However, Natuzzi SpA is 1.37 times more volatile than MasterBrand. It trades about 0.09 of its potential returns per unit of risk. MasterBrand is currently generating about -0.06 per unit of risk. If you would invest  428.00  in Natuzzi SpA on December 30, 2024 and sell it today you would earn a total of  63.00  from holding Natuzzi SpA or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Natuzzi SpA  vs.  MasterBrand

Natuzzi SpA

Risk-Adjusted Performance

OK

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.

MasterBrand

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Natuzzi SpA and MasterBrand

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

The idea behind Natuzzi SpA and MasterBrand 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.