Correlation Between CV Sciences and 4Front Ventures

Can any of the company-specific risk be diversified away by investing in both CV Sciences and 4Front Ventures 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 CV Sciences and 4Front Ventures into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CV Sciences and 4Front Ventures Corp, you can compare the effects of market volatilities on CV Sciences and 4Front Ventures 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 CV Sciences with a short position of 4Front Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of CV Sciences and 4Front Ventures.

Diversification Opportunities for CV Sciences and 4Front Ventures

0.79

Correlation Coefficient

CV Sciences  4Front Ventures

Poor diversification

The 3 months correlation between CVSI and 4Front is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CV Sciences and 4Front Ventures Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4Front Ventures Corp and CV Sciences 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 CV Sciences are associated (or correlated) with 4Front Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4Front Ventures Corp has no effect on the direction of CV Sciences i.e., CV Sciences and 4Front Ventures go up and down completely randomly.

Pair Corralation between CV Sciences and 4Front Ventures

Given the investment horizon of 90 days CV Sciences is expected to generate 11.43 times less return on investment than 4Front Ventures. But when comparing it to its historical volatility, CV Sciences is 1.45 times less risky than 4Front Ventures. It trades about 0.0 of its potential returns per unit of risk. 4Front Ventures Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.50  in 4Front Ventures Corp on September 20, 2024 and sell it today you would lose (1.60) from holding 4Front Ventures Corp or give up 35.56% of portfolio value over 90 days.

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

CV Sciences  vs.  4Front Ventures Corp

CV Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CV Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CV Sciences is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

4Front Ventures Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 4Front Ventures Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, 4Front Ventures may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CV Sciences and 4Front Ventures

The main advantage of trading using opposite CV Sciences and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CV Sciences position performs unexpectedly, 4Front Ventures 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 4Front Ventures will offset losses from the drop in 4Front Ventures' long position.

The idea behind CV Sciences and 4Front Ventures Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.