Correlation Between Pool and Alvotech

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

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

Diversification Opportunities for Pool and Alvotech

-0.48

Correlation Coefficient

Pool  Alvotech

Very good diversification

The 3 months correlation between Pool and Alvotech is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Pool 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 Pool Corporation 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 Pool i.e., Pool and Alvotech go up and down completely randomly.

Pair Corralation between Pool and Alvotech

Given the investment horizon of 90 days Pool Corporation is expected to under-perform the Alvotech. In addition to that, Pool is 1.18 times more volatile than Alvotech. It trades about -0.05 of its total potential returns per unit of risk. Alvotech is currently generating about 0.06 per unit of volatility. If you would invest  1,255  in Alvotech on October 7, 2024 and sell it today you would earn a total of  71.00  from holding Alvotech or generate 5.66% return on investment over 90 days.

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

Pool Corp.  vs.  Alvotech

Pool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pool Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Alvotech

Risk-Adjusted Performance

4 of 100

Insignificant

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 weak basic indicators, Alvotech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pool and Alvotech

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