Correlation Between Alvotech and Arion Banki

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

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

Diversification Opportunities for Alvotech and Arion Banki

0.84

Correlation Coefficient

Alvotech  Arion Banki

Very poor diversification

The 3 months correlation between Alvotech and Arion is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf and Alvotech 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 Alvotech are associated (or correlated) with Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Alvotech i.e., Alvotech and Arion Banki go up and down completely randomly.

Pair Corralation between Alvotech and Arion Banki

Assuming the 90 days trading horizon Alvotech is expected to generate 20.87 times less return on investment than Arion Banki. In addition to that, Alvotech is 1.4 times more volatile than Arion banki hf. It trades about 0.01 of its total potential returns per unit of risk. Arion banki hf is currently generating about 0.16 per unit of volatility. If you would invest  13,950  in Arion banki hf on August 30, 2024 and sell it today you would earn a total of  1,750  from holding Arion banki hf or generate 12.54% return on investment over 90 days.

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

Alvotech  vs.  Arion banki hf

Alvotech

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Alvotech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Arion banki hf

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Arion Banki may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Alvotech and Arion Banki

The main advantage of trading using opposite Alvotech and Arion Banki positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alvotech position performs unexpectedly, Arion Banki 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 Arion Banki will offset losses from the drop in Arion Banki's long position.

The idea behind Alvotech and Arion banki hf 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.