Correlation Between Cardinal Health and Alvotech

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

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

Diversification Opportunities for Cardinal Health and Alvotech

0.16

Correlation Coefficient

Cardinal Health  Alvotech

Average diversification

The 3 months correlation between Cardinal and Alvotech is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Cardinal Health 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 Cardinal Health 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 Cardinal Health i.e., Cardinal Health and Alvotech go up and down completely randomly.

Pair Corralation between Cardinal Health and Alvotech

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.58 times more return on investment than Alvotech. However, Cardinal Health is 1.73 times less risky than Alvotech. It trades about 0.1 of its potential returns per unit of risk. Alvotech is currently generating about -0.01 per unit of risk. If you would invest  12,195  in Cardinal Health on December 2, 2024 and sell it today you would earn a total of  753.00  from holding Cardinal Health or generate 6.17% return on investment over 90 days.

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

Cardinal Health  vs.  Alvotech

Cardinal Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alvotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alvotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alvotech is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and Alvotech

The main advantage of trading using opposite Cardinal Health and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health 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 Cardinal Health 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.