Correlation Between Alvotech and PT Lippo

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

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

Diversification Opportunities for Alvotech and PT Lippo

-0.3

Correlation Coefficient

Alvotech  PT Lippo

Very good diversification

The 3 months correlation between Alvotech and PTLKF is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and PT Lippo Karawaci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Lippo Karawaci 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 PT Lippo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Lippo Karawaci has no effect on the direction of Alvotech i.e., Alvotech and PT Lippo go up and down completely randomly.

Pair Corralation between Alvotech and PT Lippo

Given the investment horizon of 90 days Alvotech is expected to under-perform the PT Lippo. In addition to that, Alvotech is 1.38 times more volatile than PT Lippo Karawaci. It trades about -0.04 of its total potential returns per unit of risk. PT Lippo Karawaci is currently generating about 0.13 per unit of volatility. If you would invest  0.90  in PT Lippo Karawaci on December 4, 2024 and sell it today you would earn a total of  0.10  from holding PT Lippo Karawaci or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Alvotech  vs.  PT Lippo Karawaci

Alvotech

Risk-Adjusted Performance

Very 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.

PT Lippo Karawaci

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Lippo Karawaci are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, PT Lippo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alvotech and PT Lippo

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

The idea behind Alvotech and PT Lippo Karawaci 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.