Correlation Between ALLSTATE and Alvotech

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

By analyzing existing cross correlation between ALLSTATE P 555 and Alvotech, you can compare the effects of market volatilities on ALLSTATE 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 ALLSTATE with a short position of Alvotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLSTATE and Alvotech.

Diversification Opportunities for ALLSTATE and Alvotech

-0.34

Correlation Coefficient

ALLSTATE  Alvotech

Very good diversification

The 3 months correlation between ALLSTATE and Alvotech is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 555 and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and ALLSTATE 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 ALLSTATE P 555 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 ALLSTATE i.e., ALLSTATE and Alvotech go up and down completely randomly.

Pair Corralation between ALLSTATE and Alvotech

Assuming the 90 days trading horizon ALLSTATE P 555 is expected to generate 0.82 times more return on investment than Alvotech. However, ALLSTATE P 555 is 1.22 times less risky than Alvotech. It trades about 0.05 of its potential returns per unit of risk. Alvotech is currently generating about -0.05 per unit of risk. If you would invest  10,142  in ALLSTATE P 555 on December 26, 2024 and sell it today you would earn a total of  395.00  from holding ALLSTATE P 555 or generate 3.89% return on investment over 90 days.

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

ALLSTATE P 555  vs.  Alvotech

ALLSTATE P 555

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALLSTATE P 555 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ALLSTATE and Alvotech

The main advantage of trading using opposite ALLSTATE and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALLSTATE 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 ALLSTATE P 555 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 Global Correlations module to find global opportunities by holding instruments from different markets.