Correlation Between Earth Science and 4Front Ventures

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

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

Diversification Opportunities for Earth Science and 4Front Ventures

0.66

Correlation Coefficient

Earth Science  4Front Ventures

Poor diversification

The 3 months correlation between Earth and 4Front is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Earth Science Tech 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 Earth Science 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 Earth Science Tech 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 Earth Science i.e., Earth Science and 4Front Ventures go up and down completely randomly.

Pair Corralation between Earth Science and 4Front Ventures

Given the investment horizon of 90 days Earth Science Tech is expected to generate 1.7 times more return on investment than 4Front Ventures. However, Earth Science is 1.7 times more volatile than 4Front Ventures Corp. It trades about 0.05 of its potential returns per unit of risk. 4Front Ventures Corp is currently generating about -0.11 per unit of risk. If you would invest  13.00  in Earth Science Tech on September 12, 2024 and sell it today you would lose (1.00) from holding Earth Science Tech or give up 7.69% of portfolio value over 90 days.

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

Earth Science Tech  vs.  4Front Ventures Corp

Earth Science Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Earth Science Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Earth Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 weak 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 Earth Science and 4Front Ventures

The main advantage of trading using opposite Earth Science and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earth Science 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 Earth Science Tech 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.