Correlation Between Alvotech and Knife River

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

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

Diversification Opportunities for Alvotech and Knife River

-0.42

Correlation Coefficient

Alvotech  Knife River

Very good diversification

The 3 months correlation between Alvotech and Knife is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River 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 Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Alvotech i.e., Alvotech and Knife River go up and down completely randomly.

Pair Corralation between Alvotech and Knife River

Given the investment horizon of 90 days Alvotech is expected to generate 0.66 times more return on investment than Knife River. However, Alvotech is 1.51 times less risky than Knife River. It trades about 0.41 of its potential returns per unit of risk. Knife River is currently generating about -0.03 per unit of risk. If you would invest  1,161  in Alvotech on October 4, 2024 and sell it today you would earn a total of  162.00  from holding Alvotech or generate 13.95% return on investment over 90 days.

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

Alvotech  vs.  Knife River

Alvotech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alvotech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Knife River

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alvotech and Knife River

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

The idea behind Alvotech and Knife River 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.