Correlation Between NewAmsterdam Pharma and Alvotech Warrant

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

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

Diversification Opportunities for NewAmsterdam Pharma and Alvotech Warrant

0.53

Correlation Coefficient

NewAmsterdam Pharma  Alvotech Warrant

Very weak diversification

The 3 months correlation between NewAmsterdam and Alvotech is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NewAmsterdam Pharma and Alvotech Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech Warrant and NewAmsterdam Pharma 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 NewAmsterdam Pharma are associated (or correlated) with Alvotech Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alvotech Warrant has no effect on the direction of NewAmsterdam Pharma i.e., NewAmsterdam Pharma and Alvotech Warrant go up and down completely randomly.

Pair Corralation between NewAmsterdam Pharma and Alvotech Warrant

Assuming the 90 days horizon NewAmsterdam Pharma is expected to generate 2.11 times more return on investment than Alvotech Warrant. However, NewAmsterdam Pharma is 2.11 times more volatile than Alvotech Warrant. It trades about 0.07 of its potential returns per unit of risk. Alvotech Warrant is currently generating about -0.01 per unit of risk. If you would invest  850.00  in NewAmsterdam Pharma on December 1, 2024 and sell it today you would earn a total of  210.00  from holding NewAmsterdam Pharma or generate 24.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

NewAmsterdam Pharma  vs.  Alvotech Warrant

NewAmsterdam Pharma

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, NewAmsterdam Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Alvotech Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alvotech Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Alvotech Warrant is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NewAmsterdam Pharma and Alvotech Warrant

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

The idea behind NewAmsterdam Pharma and Alvotech Warrant 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.