Correlation Between Shionogi and 4Front Ventures

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

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

Diversification Opportunities for Shionogi and 4Front Ventures

0.42

Correlation Coefficient

Shionogi  4Front Ventures

Very weak diversification

The 3 months correlation between Shionogi and 4Front is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co 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 Shionogi 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 Shionogi Co 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 Shionogi i.e., Shionogi and 4Front Ventures go up and down completely randomly.

Pair Corralation between Shionogi and 4Front Ventures

Assuming the 90 days horizon Shionogi Co is expected to generate 7.49 times more return on investment than 4Front Ventures. However, Shionogi is 7.49 times more volatile than 4Front Ventures Corp. It trades about 0.2 of its potential returns per unit of risk. 4Front Ventures Corp is currently generating about -0.01 per unit of risk. If you would invest  1,512  in Shionogi Co on September 16, 2024 and sell it today you would lose (102.00) from holding Shionogi Co or give up 6.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.92%
Values	Daily Returns

Shionogi Co  vs.  4Front Ventures Corp

Shionogi

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shionogi reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Shionogi and 4Front Ventures

The main advantage of trading using opposite Shionogi and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shionogi 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 Shionogi Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.