Correlation Between 4Front Ventures and Decibel Cannabis

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

Diversification Opportunities for 4Front Ventures and Decibel Cannabis

-0.16

Correlation Coefficient

4Front Ventures  Decibel Cannabis

Good diversification

The 3 months correlation between 4Front and Decibel is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding 4Front Ventures Corp and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis 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 Decibel Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decibel Cannabis has no effect on the direction of 4Front Ventures i.e., 4Front Ventures and Decibel Cannabis go up and down completely randomly.

Pair Corralation between 4Front Ventures and Decibel Cannabis

Assuming the 90 days horizon 4Front Ventures Corp is expected to generate 2.9 times more return on investment than Decibel Cannabis. However, 4Front Ventures is 2.9 times more volatile than Decibel Cannabis. It trades about 0.11 of its potential returns per unit of risk. Decibel Cannabis is currently generating about 0.01 per unit of risk. If you would invest  1.00  in 4Front Ventures Corp on December 29, 2024 and sell it today you would earn a total of  0.36  from holding 4Front Ventures Corp or generate 36.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

4Front Ventures Corp  vs.  Decibel Cannabis

4Front Ventures Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 4Front Ventures Corp are ranked lower than 8 (%) 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.

Decibel Cannabis

Risk-Adjusted Performance

Weak

Over the last 90 days Decibel Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Decibel Cannabis is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with 4Front Ventures and Decibel Cannabis

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

The idea behind 4Front Ventures Corp and Decibel Cannabis 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.