Correlation Between Willis Lease and Natuzzi SpA

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

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

Diversification Opportunities for Willis Lease and Natuzzi SpA

0.18

Correlation Coefficient

Willis Lease  Natuzzi SpA

Average diversification

The 3 months correlation between Willis and Natuzzi is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and Natuzzi SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natuzzi SpA and Willis Lease 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 Willis Lease Finance are associated (or correlated) with Natuzzi SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natuzzi SpA has no effect on the direction of Willis Lease i.e., Willis Lease and Natuzzi SpA go up and down completely randomly.

Pair Corralation between Willis Lease and Natuzzi SpA

Given the investment horizon of 90 days Willis Lease Finance is expected to generate 0.88 times more return on investment than Natuzzi SpA. However, Willis Lease Finance is 1.13 times less risky than Natuzzi SpA. It trades about 0.3 of its potential returns per unit of risk. Natuzzi SpA is currently generating about 0.07 per unit of risk. If you would invest  10,218  in Willis Lease Finance on September 2, 2024 and sell it today you would earn a total of  11,589  from holding Willis Lease Finance or generate 113.42% return on investment over 90 days.

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

Willis Lease Finance  vs.  Natuzzi SpA

Willis Lease Finance

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Willis Lease and Natuzzi SpA

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

The idea behind Willis Lease Finance and Natuzzi SpA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.