Correlation Between Alvotech and Icelandair Group

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

By analyzing existing cross correlation between Alvotech and Icelandair Group hf, you can compare the effects of market volatilities on Alvotech and Icelandair Group 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 Alvotech with a short position of Icelandair Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alvotech and Icelandair Group.

Diversification Opportunities for Alvotech and Icelandair Group

0.56

Correlation Coefficient

Alvotech  Icelandair Group

Very weak diversification

The 3 months correlation between Alvotech and Icelandair is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Icelandair Group hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icelandair Group and Alvotech 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 Alvotech are associated (or correlated) with Icelandair Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icelandair Group has no effect on the direction of Alvotech i.e., Alvotech and Icelandair Group go up and down completely randomly.

Pair Corralation between Alvotech and Icelandair Group

Assuming the 90 days trading horizon Alvotech is expected to generate 1.13 times more return on investment than Icelandair Group. However, Alvotech is 1.13 times more volatile than Icelandair Group hf. It trades about 0.0 of its potential returns per unit of risk. Icelandair Group hf is currently generating about -0.01 per unit of risk. If you would invest  160,500  in Alvotech on December 3, 2024 and sell it today you would lose (2,000) from holding Alvotech or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alvotech  vs.  Icelandair Group hf

Alvotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alvotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Alvotech is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Icelandair Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icelandair Group hf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Icelandair Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alvotech and Icelandair Group

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

The idea behind Alvotech and Icelandair Group hf 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.