Correlation Between Employers Holdings and Alvotech

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

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

Diversification Opportunities for Employers Holdings and Alvotech

-0.35

Correlation Coefficient

Employers Holdings  Alvotech

Very good diversification

The 3 months correlation between Employers and Alvotech is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Employers Holdings 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 Employers Holdings 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 Employers Holdings i.e., Employers Holdings and Alvotech go up and down completely randomly.

Pair Corralation between Employers Holdings and Alvotech

Considering the 90-day investment horizon Employers Holdings is expected to generate 0.77 times more return on investment than Alvotech. However, Employers Holdings is 1.3 times less risky than Alvotech. It trades about 0.11 of its potential returns per unit of risk. Alvotech is currently generating about 0.02 per unit of risk. If you would invest  4,235  in Employers Holdings on September 27, 2024 and sell it today you would earn a total of  890.00  from holding Employers Holdings or generate 21.02% return on investment over 90 days.

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

Employers Holdings  vs.  Alvotech

Employers Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alvotech

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Alvotech is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Employers Holdings and Alvotech

The main advantage of trading using opposite Employers Holdings and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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 Employers Holdings 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.