Correlation Between Arion Banki and Alvotech

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

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

Diversification Opportunities for Arion Banki and Alvotech

0.82

Correlation Coefficient

Arion Banki  Alvotech

Very poor diversification

The 3 months correlation between Arion and Alvotech is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Arion Banki 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 Arion banki hf are associated (or correlated) with Alvotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alvotech has no effect on the direction of Arion Banki i.e., Arion Banki and Alvotech go up and down completely randomly.

Pair Corralation between Arion Banki and Alvotech

Assuming the 90 days trading horizon Arion banki hf is expected to generate 0.7 times more return on investment than Alvotech. However, Arion banki hf is 1.42 times less risky than Alvotech. It trades about 0.17 of its potential returns per unit of risk. Alvotech is currently generating about 0.02 per unit of risk. If you would invest  14,000  in Arion banki hf on September 5, 2024 and sell it today you would earn a total of  1,800  from holding Arion banki hf or generate 12.86% return on investment over 90 days.

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

Arion banki hf  vs.  Alvotech

Arion banki hf

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Arion Banki may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alvotech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Alvotech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arion Banki and Alvotech

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

The idea behind Arion banki hf and Alvotech 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 Global Correlations module to find global opportunities by holding instruments from different markets.