Correlation Between SCE Trust and Alvotech

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

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

Diversification Opportunities for SCE Trust and Alvotech

0.03

Correlation Coefficient

SCE Trust  Alvotech

Significant diversification

The 3 months correlation between SCE and Alvotech is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SCE Trust IV and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and SCE Trust 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 SCE Trust IV 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 SCE Trust i.e., SCE Trust and Alvotech go up and down completely randomly.

Pair Corralation between SCE Trust and Alvotech

Assuming the 90 days trading horizon SCE Trust IV is expected to generate 0.4 times more return on investment than Alvotech. However, SCE Trust IV is 2.49 times less risky than Alvotech. It trades about -0.11 of its potential returns per unit of risk. Alvotech is currently generating about -0.14 per unit of risk. If you would invest  2,415  in SCE Trust IV on December 29, 2024 and sell it today you would lose (155.00) from holding SCE Trust IV or give up 6.42% of portfolio value over 90 days.

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

SCE Trust IV  vs.  Alvotech

SCE Trust IV

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCE Trust IV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Preferred Stock's technical and fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Alvotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alvotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with SCE Trust and Alvotech

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

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.