Correlation Between Anheuser Busch and Alvotech

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

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

Diversification Opportunities for Anheuser Busch and Alvotech

0.22

Correlation Coefficient

Anheuser Busch  Alvotech

Modest diversification

The 3 months correlation between Anheuser and Alvotech is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Anheuser Busch 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 Anheuser Busch Inbev 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 Anheuser Busch i.e., Anheuser Busch and Alvotech go up and down completely randomly.

Pair Corralation between Anheuser Busch and Alvotech

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to under-perform the Alvotech. But the stock apears to be less risky and, when comparing its historical volatility, Anheuser Busch Inbev is 1.12 times less risky than Alvotech. The stock trades about -0.39 of its potential returns per unit of risk. The Alvotech is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,242  in Alvotech on September 21, 2024 and sell it today you would lose (46.00) from holding Alvotech or give up 3.7% of portfolio value over 90 days.

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

Anheuser Busch Inbev  vs.  Alvotech

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Anheuser Busch and Alvotech

The main advantage of trading using opposite Anheuser Busch and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch Inbev 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.