Correlation Between Alvotech and Nextera Energy

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

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

Diversification Opportunities for Alvotech and Nextera Energy

-0.16

Correlation Coefficient

Alvotech  Nextera Energy

Good diversification

The 3 months correlation between Alvotech and Nextera is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy 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 Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy has no effect on the direction of Alvotech i.e., Alvotech and Nextera Energy go up and down completely randomly.

Pair Corralation between Alvotech and Nextera Energy

Given the investment horizon of 90 days Alvotech is expected to generate 0.64 times more return on investment than Nextera Energy. However, Alvotech is 1.57 times less risky than Nextera Energy. It trades about 0.18 of its potential returns per unit of risk. Nextera Energy is currently generating about 0.07 per unit of risk. If you would invest  1,260  in Alvotech on October 27, 2024 and sell it today you would earn a total of  52.00  from holding Alvotech or generate 4.13% return on investment over 90 days.

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

Alvotech  vs.  Nextera Energy

Alvotech

Risk-Adjusted Performance

1 of 100

Very 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.

Nextera Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Nextera Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alvotech and Nextera Energy

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

The idea behind Alvotech and Nextera Energy 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..