Correlation Between Natuzzi SpA and TPX Old

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

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

Diversification Opportunities for Natuzzi SpA and TPX Old

0.06

Correlation Coefficient

Natuzzi SpA  TPX Old

Significant diversification

The 3 months correlation between Natuzzi and TPX is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Natuzzi SpA and TPX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPX Old 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 TPX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPX Old has no effect on the direction of Natuzzi SpA i.e., Natuzzi SpA and TPX Old go up and down completely randomly.

Pair Corralation between Natuzzi SpA and TPX Old

Considering the 90-day investment horizon Natuzzi SpA is expected to generate 5.89 times less return on investment than TPX Old. In addition to that, Natuzzi SpA is 1.62 times more volatile than TPX Old. It trades about 0.03 of its total potential returns per unit of risk. TPX Old is currently generating about 0.31 per unit of volatility. If you would invest  5,583  in TPX Old on December 25, 2024 and sell it today you would earn a total of  1,295  from holding TPX Old or generate 23.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.34%
Values	Daily Returns

Natuzzi SpA  vs.  TPX Old

Natuzzi SpA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Natuzzi SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Natuzzi SpA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TPX Old

Risk-Adjusted Performance

Solid

Over the last 90 days TPX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, TPX Old showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natuzzi SpA and TPX Old

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

The idea behind Natuzzi SpA and TPX Old 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..