Correlation Between Alvotech and Haleon Plc

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

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

Diversification Opportunities for Alvotech and Haleon Plc

-0.63

Correlation Coefficient

Alvotech  Haleon Plc

Excellent diversification

The 3 months correlation between Alvotech and Haleon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Haleon plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon plc 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 Haleon Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon plc has no effect on the direction of Alvotech i.e., Alvotech and Haleon Plc go up and down completely randomly.

Pair Corralation between Alvotech and Haleon Plc

Given the investment horizon of 90 days Alvotech is expected to generate 4.99 times less return on investment than Haleon Plc. In addition to that, Alvotech is 1.69 times more volatile than Haleon plc. It trades about 0.01 of its total potential returns per unit of risk. Haleon plc is currently generating about 0.09 per unit of volatility. If you would invest  966.00  in Haleon plc on November 28, 2024 and sell it today you would earn a total of  55.50  from holding Haleon plc or generate 5.75% return on investment over 90 days.

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

Alvotech  vs.  Haleon plc

Alvotech

Risk-Adjusted Performance

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.

Haleon plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haleon plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Haleon Plc may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Alvotech and Haleon Plc

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

The idea behind Alvotech and Haleon 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.