Correlation Between Alvotech and Centessa Pharmaceuticals

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

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

Diversification Opportunities for Alvotech and Centessa Pharmaceuticals

-0.36

Correlation Coefficient

Alvotech  Centessa Pharmaceuticals

Very good diversification

The 3 months correlation between Alvotech and Centessa is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals 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 Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Alvotech i.e., Alvotech and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Alvotech and Centessa Pharmaceuticals

Given the investment horizon of 90 days Alvotech is expected to generate 0.51 times more return on investment than Centessa Pharmaceuticals. However, Alvotech is 1.96 times less risky than Centessa Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about -0.04 per unit of risk. If you would invest  1,175  in Alvotech on November 28, 2024 and sell it today you would earn a total of  7.00  from holding Alvotech or generate 0.6% return on investment over 90 days.

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

Alvotech  vs.  Centessa Pharmaceuticals PLC

Alvotech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Centessa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centessa Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite 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 Alvotech and Centessa Pharmaceuticals

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

The idea behind Alvotech and Centessa Pharmaceuticals PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.