Correlation Between Alvotech Warrant and Compass Digital

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

By analyzing existing cross correlation between Alvotech Warrant and Compass Digital Acquisition, you can compare the effects of market volatilities on Alvotech Warrant and Compass Digital 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 Warrant with a short position of Compass Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alvotech Warrant and Compass Digital.

Diversification Opportunities for Alvotech Warrant and Compass Digital

-0.12

Correlation Coefficient

Alvotech Warrant  Compass Digital

Good diversification

The 3 months correlation between Alvotech and Compass is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech Warrant and Compass Digital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Digital Acqu and Alvotech Warrant 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 Warrant are associated (or correlated) with Compass Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Digital Acqu has no effect on the direction of Alvotech Warrant i.e., Alvotech Warrant and Compass Digital go up and down completely randomly.

Pair Corralation between Alvotech Warrant and Compass Digital

Assuming the 90 days horizon Alvotech Warrant is expected to generate 3.54 times less return on investment than Compass Digital. But when comparing it to its historical volatility, Alvotech Warrant is 1.43 times less risky than Compass Digital. It trades about 0.03 of its potential returns per unit of risk. Compass Digital Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6.10  in Compass Digital Acquisition on September 14, 2024 and sell it today you would earn a total of  0.23  from holding Compass Digital Acquisition or generate 3.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.87%
Values	Daily Returns

Alvotech Warrant  vs.  Compass Digital Acquisition

Alvotech Warrant

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech Warrant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Alvotech Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Compass Digital Acqu

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Compass Digital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Compass Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alvotech Warrant and Compass Digital

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

The idea behind Alvotech Warrant and Compass Digital Acquisition 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.