Correlation Between Alvotech Warrant and Scilex Holding

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

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

Diversification Opportunities for Alvotech Warrant and Scilex Holding

0.76

Correlation Coefficient

Alvotech Warrant  Scilex Holding

Poor diversification

The 3 months correlation between Alvotech and Scilex is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech Warrant and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Alvotech Warrant i.e., Alvotech Warrant and Scilex Holding go up and down completely randomly.

Pair Corralation between Alvotech Warrant and Scilex Holding

Assuming the 90 days horizon Alvotech Warrant is expected to under-perform the Scilex Holding. But the stock apears to be less risky and, when comparing its historical volatility, Alvotech Warrant is 1.31 times less risky than Scilex Holding. The stock trades about -0.04 of its potential returns per unit of risk. The Scilex Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Scilex Holding on December 30, 2024 and sell it today you would lose (10.00) from holding Scilex Holding or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Alvotech Warrant  vs.  Scilex Holding

Alvotech Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alvotech Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Scilex Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alvotech Warrant and Scilex Holding

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

The idea behind Alvotech Warrant and Scilex Holding 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.