Correlation Between Alvotech and Teva Pharma

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

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

Diversification Opportunities for Alvotech and Teva Pharma

0.75

Correlation Coefficient

Alvotech  Teva Pharma

Poor diversification

The 3 months correlation between Alvotech and Teva is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Teva Pharma Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharma Industries 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 Teva Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teva Pharma Industries has no effect on the direction of Alvotech i.e., Alvotech and Teva Pharma go up and down completely randomly.

Pair Corralation between Alvotech and Teva Pharma

Given the investment horizon of 90 days Alvotech is expected to generate 0.85 times more return on investment than Teva Pharma. However, Alvotech is 1.18 times less risky than Teva Pharma. It trades about -0.14 of its potential returns per unit of risk. Teva Pharma Industries is currently generating about -0.2 per unit of risk. If you would invest  1,302  in Alvotech on December 29, 2024 and sell it today you would lose (266.00) from holding Alvotech or give up 20.43% of portfolio value over 90 days.

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

Alvotech  vs.  Teva Pharma Industries

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Teva Pharma Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teva Pharma Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alvotech and Teva Pharma

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

The idea behind Alvotech and Teva Pharma Industries 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..