Correlation Between 4Front Ventures and American Green

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

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

Diversification Opportunities for 4Front Ventures and American Green

-0.62

Correlation Coefficient

4Front Ventures  American Green

Excellent diversification

The 3 months correlation between 4Front and American is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding 4Front Ventures Corp and American Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Green and 4Front Ventures 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 4Front Ventures Corp are associated (or correlated) with American Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Green has no effect on the direction of 4Front Ventures i.e., 4Front Ventures and American Green go up and down completely randomly.

Pair Corralation between 4Front Ventures and American Green

Assuming the 90 days horizon 4Front Ventures is expected to generate 5.34 times less return on investment than American Green. But when comparing it to its historical volatility, 4Front Ventures Corp is 1.0 times less risky than American Green. It trades about 0.03 of its potential returns per unit of risk. American Green is currently generating about 0.18 of returns per unit of risk over similar time horizon. 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	95.45%
Values	Daily Returns

4Front Ventures Corp  vs.  American Green

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.

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.

Pair Trading with 4Front Ventures and American Green

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

The idea behind 4Front Ventures Corp and American Green 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.