Correlation Between Viomi Technology and Natuzzi SpA

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

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

Diversification Opportunities for Viomi Technology and Natuzzi SpA

0.62

Correlation Coefficient

Viomi Technology  Natuzzi SpA

Poor diversification

The 3 months correlation between Viomi and Natuzzi is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Viomi Technology ADR and Natuzzi SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natuzzi SpA and Viomi Technology 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 Viomi Technology ADR 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 Viomi Technology i.e., Viomi Technology and Natuzzi SpA go up and down completely randomly.

Pair Corralation between Viomi Technology and Natuzzi SpA

Given the investment horizon of 90 days Viomi Technology ADR is expected to generate 1.51 times more return on investment than Natuzzi SpA. However, Viomi Technology is 1.51 times more volatile than Natuzzi SpA. It trades about 0.24 of its potential returns per unit of risk. Natuzzi SpA is currently generating about -0.1 per unit of risk. If you would invest  56.00  in Viomi Technology ADR on February 4, 2024 and sell it today you would earn a total of  11.35  from holding Viomi Technology ADR or generate 20.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Viomi Technology ADR  vs.  Natuzzi SpA

Viomi Technology ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viomi Technology ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Natuzzi SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natuzzi SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Viomi Technology and Natuzzi SpA

The main advantage of trading using opposite Viomi Technology and Natuzzi SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viomi Technology 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 Viomi Technology ADR 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.