Correlation Between Alvotech and Merck

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

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

Diversification Opportunities for Alvotech and Merck

-0.67

Correlation Coefficient

Alvotech  Merck

Excellent diversification

The 3 months correlation between Alvotech and Merck is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alvotech and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Alvotech i.e., Alvotech and Merck go up and down completely randomly.

Pair Corralation between Alvotech and Merck

Given the investment horizon of 90 days Alvotech is expected to generate 1.94 times more return on investment than Merck. However, Alvotech is 1.94 times more volatile than Merck Company. It trades about 0.04 of its potential returns per unit of risk. Merck Company is currently generating about -0.02 per unit of risk. If you would invest  833.00  in Alvotech on May 5, 2025 and sell it today you would earn a total of  46.00  from holding Alvotech or generate 5.52% return on investment over 90 days.

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

Alvotech  vs.  Merck Company

Alvotech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alvotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Alvotech may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alvotech and Merck

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

The idea behind Alvotech and Merck Company 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.