Correlation Between 4Front Ventures and Willow Biosciences

Can any of the company-specific risk be diversified away by investing in both 4Front Ventures and Willow Biosciences 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 Willow Biosciences 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 Willow Biosciences, you can compare the effects of market volatilities on 4Front Ventures and Willow Biosciences 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 Willow Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4Front Ventures and Willow Biosciences.

Diversification Opportunities for 4Front Ventures and Willow Biosciences

0.81

Correlation Coefficient

4Front Ventures  Willow Biosciences

Very poor diversification

The 3 months correlation between 4Front and Willow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding 4Front Ventures Corp and Willow Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willow Biosciences 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 Willow Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willow Biosciences has no effect on the direction of 4Front Ventures i.e., 4Front Ventures and Willow Biosciences go up and down completely randomly.

Pair Corralation between 4Front Ventures and Willow Biosciences

Assuming the 90 days horizon 4Front Ventures Corp is expected to under-perform the Willow Biosciences. In addition to that, 4Front Ventures is 1.83 times more volatile than Willow Biosciences. It trades about -0.09 of its total potential returns per unit of risk. Willow Biosciences is currently generating about -0.05 per unit of volatility. 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

4Front Ventures Corp  vs.  Willow Biosciences

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.

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.

Pair Trading with 4Front Ventures and Willow Biosciences

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

The idea behind 4Front Ventures Corp and Willow Biosciences 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.