Correlation Between Canopy Growth and 4Front Ventures

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

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

Diversification Opportunities for Canopy Growth and 4Front Ventures

0.27

Correlation Coefficient

Canopy Growth  4Front Ventures

Modest diversification

The 3 months correlation between Canopy and 4Front is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp 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 Canopy Growth 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 Canopy Growth Corp 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 Canopy Growth i.e., Canopy Growth and 4Front Ventures go up and down completely randomly.

Pair Corralation between Canopy Growth and 4Front Ventures

Considering the 90-day investment horizon Canopy Growth Corp is expected to under-perform the 4Front Ventures. But the stock apears to be less risky and, when comparing its historical volatility, Canopy Growth Corp is 2.97 times less risky than 4Front Ventures. The stock trades about -0.22 of its potential returns per unit of risk. The 4Front Ventures Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.00  in 4Front Ventures Corp on December 20, 2024 and sell it today you would lose (0.50) from holding 4Front Ventures Corp or give up 25.0% of portfolio value over 90 days.

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

Canopy Growth Corp  vs.  4Front Ventures Corp

Canopy Growth Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

4Front Ventures Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 4Front Ventures Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, 4Front Ventures reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canopy Growth and 4Front Ventures

The main advantage of trading using opposite Canopy Growth and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canopy Growth 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 Canopy Growth Corp 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 CEOs Directory module to screen CEOs from public companies around the world.