Correlation Between Universal and Alvotech

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

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

Diversification Opportunities for Universal and Alvotech

-0.45

Correlation Coefficient

Universal  Alvotech

Very good diversification

The 3 months correlation between Universal and Alvotech is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Alvotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alvotech and Universal 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 Universal 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 Universal i.e., Universal and Alvotech go up and down completely randomly.

Pair Corralation between Universal and Alvotech

Considering the 90-day investment horizon Universal is expected to generate 1.06 times more return on investment than Alvotech. However, Universal is 1.06 times more volatile than Alvotech. It trades about -0.01 of its potential returns per unit of risk. Alvotech is currently generating about -0.13 per unit of risk. If you would invest  5,489  in Universal on September 21, 2024 and sell it today you would lose (26.00) from holding Universal or give up 0.47% of portfolio value over 90 days.

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

Universal  vs.  Alvotech

Universal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Universal and Alvotech

The main advantage of trading using opposite Universal and Alvotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.