Correlation Between American Green and 4Front Ventures

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

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

Diversification Opportunities for American Green and 4Front Ventures

-0.62

Correlation Coefficient

American Green  4Front Ventures

Excellent diversification

The 3 months correlation between American and 4Front is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Green 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 American Green 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 American Green 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 American Green i.e., American Green and 4Front Ventures go up and down completely randomly.

Pair Corralation between American Green and 4Front Ventures

Given the investment horizon of 90 days American Green is expected to generate 1.19 times more return on investment than 4Front Ventures. However, American Green is 1.19 times more volatile than 4Front Ventures Corp. It trades about 0.12 of its potential returns per unit of risk. 4Front Ventures Corp is currently generating about 0.01 per unit of risk. If you would invest  0.04  in American Green on September 20, 2024 and sell it today you would earn a total of  0.02  from holding American Green or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

American Green  vs.  4Front Ventures Corp

American Green

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

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 American Green and 4Front Ventures

The main advantage of trading using opposite American Green and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Green 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 American Green 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.