Correlation Between Alvotech and ESGL Holdings

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

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

Diversification Opportunities for Alvotech and ESGL Holdings

-0.49

Correlation Coefficient

Alvotech  ESGL Holdings

Very good diversification

The 3 months correlation between Alvotech and ESGL is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Alvotech i.e., Alvotech and ESGL Holdings go up and down completely randomly.

Pair Corralation between Alvotech and ESGL Holdings

Given the investment horizon of 90 days Alvotech is expected to generate 868.41 times less return on investment than ESGL Holdings. But when comparing it to its historical volatility, Alvotech is 80.36 times less risky than ESGL Holdings. It trades about 0.02 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  41,625  in ESGL Holdings Limited on October 25, 2024 and sell it today you would lose (41,624) from holding ESGL Holdings Limited or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.77%
Values	Daily Returns

Alvotech  vs.  ESGL Holdings Limited

Alvotech

Risk-Adjusted Performance

1 of 100

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.

ESGL Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESGL Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Alvotech and ESGL Holdings

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

The idea behind Alvotech and ESGL Holdings Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.