Correlation Between Cisco Systems and 4Front Ventures

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

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

Diversification Opportunities for Cisco Systems and 4Front Ventures

-0.02

Correlation Coefficient

Cisco Systems  4Front Ventures

Good diversification

The 3 months correlation between Cisco and 4Front is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems 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 Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and 4Front Ventures go up and down completely randomly.

Pair Corralation between Cisco Systems and 4Front Ventures

Given the investment horizon of 90 days Cisco Systems is expected to generate 27.16 times less return on investment than 4Front Ventures. But when comparing it to its historical volatility, Cisco Systems is 15.25 times less risky than 4Front Ventures. It trades about 0.04 of its potential returns per unit of risk. 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 26, 2024 and sell it today you would lose (0.41) from holding 4Front Ventures Corp or give up 20.5% of portfolio value over 90 days.

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

Cisco Systems  vs.  4Front Ventures Corp

Cisco Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

4Front Ventures Corp

Risk-Adjusted Performance

Modest

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 Cisco Systems and 4Front Ventures

The main advantage of trading using opposite Cisco Systems and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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 Cisco Systems 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.