Correlation Between Alvotech and Universal

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

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

Diversification Opportunities for Alvotech and Universal

-0.45

Correlation Coefficient

Alvotech  Universal

Very good diversification

The 3 months correlation between Alvotech and Universal is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Alvotech i.e., Alvotech and Universal go up and down completely randomly.

Pair Corralation between Alvotech and Universal

Given the investment horizon of 90 days Alvotech is expected to under-perform the Universal. But the stock apears to be less risky and, when comparing its historical volatility, Alvotech is 1.06 times less risky than Universal. The stock trades about -0.13 of its potential returns per unit of risk. The Universal is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,489  in Universal on September 21, 2024 and sell it today you would lose (26.00) from holding Universal or give up 0.47% of portfolio value over 90 days.

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

Alvotech  vs.  Universal

Alvotech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 7 (%) 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 January 2025.

Universal

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Alvotech and Universal

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

The idea behind Alvotech and Universal 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.