Correlation Between Alvotech and Aegon Funding

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

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

Diversification Opportunities for Alvotech and Aegon Funding

0.55

Correlation Coefficient

Alvotech  Aegon Funding

Very weak diversification

The 3 months correlation between Alvotech and Aegon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding 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 Aegon Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon Funding has no effect on the direction of Alvotech i.e., Alvotech and Aegon Funding go up and down completely randomly.

Pair Corralation between Alvotech and Aegon Funding

Given the investment horizon of 90 days Alvotech is expected to under-perform the Aegon Funding. In addition to that, Alvotech is 2.2 times more volatile than Aegon Funding. It trades about -0.03 of its total potential returns per unit of risk. Aegon Funding is currently generating about -0.04 per unit of volatility. If you would invest  2,069  in Aegon Funding on December 20, 2024 and sell it today you would lose (56.00) from holding Aegon Funding or give up 2.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Alvotech  vs.  Aegon Funding

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 very healthy basic indicators, Alvotech is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Aegon Funding

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alvotech and Aegon Funding

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

The idea behind Alvotech and Aegon Funding 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.