Correlation Between 4Front Ventures and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both 4Front Ventures and Merck KGaA 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 Merck KGaA 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 Merck KGaA ADR, you can compare the effects of market volatilities on 4Front Ventures and Merck KGaA 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 Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4Front Ventures and Merck KGaA.
Diversification Opportunities for 4Front Ventures and Merck KGaA
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 4Front and Merck is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding 4Front Ventures Corp and Merck KGaA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA ADR 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 Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA ADR has no effect on the direction of 4Front Ventures i.e., 4Front Ventures and Merck KGaA go up and down completely randomly.
Pair Corralation between 4Front Ventures and Merck KGaA
Assuming the 90 days horizon 4Front Ventures Corp is expected to generate 10.48 times more return on investment than Merck KGaA. However, 4Front Ventures is 10.48 times more volatile than Merck KGaA ADR. It trades about 0.14 of its potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.02 per unit of risk. If you would invest 1.00 in 4Front Ventures Corp on December 28, 2024 and sell it today you would earn a total of 0.75 from holding 4Front Ventures Corp or generate 75.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
4Front Ventures Corp vs. Merck KGaA ADR
Performance |
Timeline |
4Front Ventures Corp |
Merck KGaA ADR |
4Front Ventures and Merck KGaA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 4Front Ventures and Merck KGaA
The main advantage of trading using opposite 4Front Ventures and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 4Front Ventures position performs unexpectedly, Merck KGaA 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 Merck KGaA will offset losses from the drop in Merck KGaA's long position.4Front Ventures vs. Goodness Growth Holdings | 4Front Ventures vs. Rubicon Organics | 4Front Ventures vs. CLS Holdings USA | 4Front Ventures vs. MPX International Corp |
Merck KGaA vs. Recruit Holdings Co | Merck KGaA vs. Fresenius SE Co | Merck KGaA vs. Straumann Holding AG | Merck KGaA vs. MERCK Kommanditgesellschaft auf |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |