Correlation Between Natuzzi SpA and Patrick Industries

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

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

Diversification Opportunities for Natuzzi SpA and Patrick Industries

0.21

Correlation Coefficient

Natuzzi SpA  Patrick Industries

Modest diversification

The 3 months correlation between Natuzzi and Patrick is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Natuzzi SpA and Patrick Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patrick Industries 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 Patrick Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patrick Industries has no effect on the direction of Natuzzi SpA i.e., Natuzzi SpA and Patrick Industries go up and down completely randomly.

Pair Corralation between Natuzzi SpA and Patrick Industries

Considering the 90-day investment horizon Natuzzi SpA is expected to generate 1.89 times more return on investment than Patrick Industries. However, Natuzzi SpA is 1.89 times more volatile than Patrick Industries. It trades about 0.07 of its potential returns per unit of risk. Patrick Industries is currently generating about 0.05 per unit of risk. If you would invest  402.00  in Natuzzi SpA on September 3, 2024 and sell it today you would earn a total of  52.00  from holding Natuzzi SpA or generate 12.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

Natuzzi SpA  vs.  Patrick Industries

Natuzzi SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natuzzi SpA are ranked lower than 5 (%) 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.

Patrick Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patrick Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Patrick Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Natuzzi SpA and Patrick Industries

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

The idea behind Natuzzi SpA and Patrick Industries 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.