Correlation Between 4Front Ventures and CLS Holdings

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

Diversification Opportunities for 4Front Ventures and CLS Holdings

0.74

Correlation Coefficient

4Front Ventures  CLS Holdings

Poor diversification

The 3 months correlation between 4Front and CLS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding 4Front Ventures Corp and CLS Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLS Holdings USA 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 CLS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLS Holdings USA has no effect on the direction of 4Front Ventures i.e., 4Front Ventures and CLS Holdings go up and down completely randomly.

Pair Corralation between 4Front Ventures and CLS Holdings

Assuming the 90 days horizon 4Front Ventures Corp is expected to under-perform the CLS Holdings. In addition to that, 4Front Ventures is 1.32 times more volatile than CLS Holdings USA. It trades about -0.06 of its total potential returns per unit of risk. CLS Holdings USA is currently generating about 0.04 per unit of volatility. If you would invest  3.41  in CLS Holdings USA on October 21, 2024 and sell it today you would lose (0.41) from holding CLS Holdings USA or give up 12.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

4Front Ventures Corp  vs.  CLS Holdings USA

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CLS Holdings USA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CLS Holdings USA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CLS Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 4Front Ventures and CLS Holdings

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

The idea behind 4Front Ventures Corp and CLS Holdings USA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.