Correlation Between Canaf Investments and Algonquin Power

Can any of the company-specific risk be diversified away by investing in both Canaf Investments and Algonquin Power 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 Canaf Investments and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canaf Investments and Algonquin Power Utilities, you can compare the effects of market volatilities on Canaf Investments and Algonquin Power 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 Canaf Investments with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canaf Investments and Algonquin Power.

Diversification Opportunities for Canaf Investments and Algonquin Power

0.86

Correlation Coefficient

Canaf Investments  Algonquin Power

Very poor diversification

The 3 months correlation between Canaf and Algonquin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Canaf Investments and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and Canaf Investments 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 Canaf Investments are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Canaf Investments i.e., Canaf Investments and Algonquin Power go up and down completely randomly.

Pair Corralation between Canaf Investments and Algonquin Power

Assuming the 90 days horizon Canaf Investments is expected to generate 5.48 times more return on investment than Algonquin Power. However, Canaf Investments is 5.48 times more volatile than Algonquin Power Utilities. It trades about 0.17 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.21 per unit of risk. If you would invest  30.00  in Canaf Investments on May 7, 2025 and sell it today you would earn a total of  10.00  from holding Canaf Investments or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Canaf Investments  vs.  Algonquin Power Utilities

Canaf Investments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canaf Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Algonquin Power Utilities

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Algonquin Power may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Canaf Investments and Algonquin Power

The main advantage of trading using opposite Canaf Investments and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canaf Investments position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.

The idea behind Canaf Investments and Algonquin Power Utilities 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.