Correlation Between Haleon Plc and Alvotech

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

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

Diversification Opportunities for Haleon Plc and Alvotech

-0.62

Correlation Coefficient

Haleon Plc  Alvotech

Excellent diversification

The 3 months correlation between Haleon and Alvotech is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Haleon Plc 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 Haleon plc 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 Haleon Plc i.e., Haleon Plc and Alvotech go up and down completely randomly.

Pair Corralation between Haleon Plc and Alvotech

Considering the 90-day investment horizon Haleon plc is expected to generate 0.77 times more return on investment than Alvotech. However, Haleon plc is 1.3 times less risky than Alvotech. It trades about 0.23 of its potential returns per unit of risk. Alvotech is currently generating about -0.09 per unit of risk. If you would invest  924.00  in Haleon plc on November 19, 2024 and sell it today you would earn a total of  47.00  from holding Haleon plc or generate 5.09% return on investment over 90 days.

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

Haleon plc  vs.  Alvotech

Haleon plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haleon plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Haleon Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Alvotech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 3 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Haleon Plc and Alvotech

The main advantage of trading using opposite Haleon Plc and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haleon Plc 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 Haleon plc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.