Correlation Between Willow Biosciences and 4Front Ventures

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

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

Diversification Opportunities for Willow Biosciences and 4Front Ventures

0.81

Correlation Coefficient

Willow Biosciences  4Front Ventures

Very poor diversification

The 3 months correlation between Willow and 4Front is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Willow Biosciences 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 Willow Biosciences 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 Willow Biosciences 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 Willow Biosciences i.e., Willow Biosciences and 4Front Ventures go up and down completely randomly.

Pair Corralation between Willow Biosciences and 4Front Ventures

Assuming the 90 days horizon Willow Biosciences is expected to generate 0.55 times more return on investment than 4Front Ventures. However, Willow Biosciences is 1.83 times less risky than 4Front Ventures. It trades about -0.05 of its potential returns per unit of risk. 4Front Ventures Corp is currently generating about -0.09 per unit of risk. If you would invest  7.00  in Willow Biosciences on September 13, 2024 and sell it today you would lose (1.87) from holding Willow Biosciences or give up 26.71% of portfolio value over 90 days.

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

Willow Biosciences  vs.  4Front Ventures Corp

Willow Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Willow Biosciences and 4Front Ventures

The main advantage of trading using opposite Willow Biosciences and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willow Biosciences 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 Willow Biosciences 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.