Correlation Between Puma Biotechnology and Alvotech Warrant

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

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

Diversification Opportunities for Puma Biotechnology and Alvotech Warrant

0.28

Correlation Coefficient

Puma Biotechnology  Alvotech Warrant

Modest diversification

The 3 months correlation between Puma and Alvotech is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Puma Biotechnology and Alvotech Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech Warrant and Puma Biotechnology 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 Puma Biotechnology 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 Puma Biotechnology i.e., Puma Biotechnology and Alvotech Warrant go up and down completely randomly.

Pair Corralation between Puma Biotechnology and Alvotech Warrant

Given the investment horizon of 90 days Puma Biotechnology is expected to generate 65.21 times less return on investment than Alvotech Warrant. But when comparing it to its historical volatility, Puma Biotechnology is 10.96 times less risky than Alvotech Warrant. It trades about 0.01 of its potential returns per unit of risk. Alvotech Warrant is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Alvotech Warrant on September 14, 2024 and sell it today you would earn a total of  127.00  from holding Alvotech Warrant or generate 99.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.6%
Values	Daily Returns

Puma Biotechnology  vs.  Alvotech Warrant

Puma Biotechnology

Risk-Adjusted Performance

5 of 100

Modest

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

Alvotech Warrant

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech Warrant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Alvotech Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Puma Biotechnology and Alvotech Warrant

The main advantage of trading using opposite Puma Biotechnology and Alvotech Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Puma Biotechnology 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 Puma Biotechnology 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.