Correlation Between Constellation Brands and Alvotech

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

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

Diversification Opportunities for Constellation Brands and Alvotech

-0.53

Correlation Coefficient

Constellation Brands  Alvotech

Excellent diversification

The 3 months correlation between Constellation and Alvotech is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Constellation Brands 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 Constellation Brands Class 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 Constellation Brands i.e., Constellation Brands and Alvotech go up and down completely randomly.

Pair Corralation between Constellation Brands and Alvotech

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the Alvotech. In addition to that, Constellation Brands is 1.09 times more volatile than Alvotech. It trades about -0.17 of its total potential returns per unit of risk. Alvotech is currently generating about -0.13 per unit of volatility. If you would invest  1,242  in Alvotech on September 21, 2024 and sell it today you would lose (46.00) from holding Alvotech or give up 3.7% of portfolio value over 90 days.

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

Constellation Brands Class  vs.  Alvotech

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alvotech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 7 (%) 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 January 2025.

Pair Trading with Constellation Brands and Alvotech

The main advantage of trading using opposite Constellation Brands and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands 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 Constellation Brands Class 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.