Correlation Between Alvotech and Microsoft

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

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

Diversification Opportunities for Alvotech and Microsoft

-0.29

Correlation Coefficient

Alvotech  Microsoft

Very good diversification

The 3 months correlation between Alvotech and Microsoft is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Alvotech i.e., Alvotech and Microsoft go up and down completely randomly.

Pair Corralation between Alvotech and Microsoft

Given the investment horizon of 90 days Alvotech is expected to under-perform the Microsoft. In addition to that, Alvotech is 3.85 times more volatile than Microsoft. It trades about -0.15 of its total potential returns per unit of risk. Microsoft is currently generating about -0.29 per unit of volatility. If you would invest  42,523  in Microsoft on January 20, 2024 and sell it today you would lose (2,611) from holding Microsoft or give up 6.14% of portfolio value over 90 days.

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

Alvotech  vs.  Microsoft

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 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.

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alvotech and Microsoft

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

The idea behind Alvotech and Microsoft 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.