Correlation Between Power Financial and Canso Credit

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Can any of the company-specific risk be diversified away by investing in both Power Financial and Canso Credit 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 Power Financial and Canso Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial Corp and Canso Credit Trust, you can compare the effects of market volatilities on Power Financial and Canso Credit 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 Power Financial with a short position of Canso Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Canso Credit.

Diversification Opportunities for Power Financial and Canso Credit

PowerCansoDiversified AwayPowerCansoDiversified Away100%
0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Power and Canso is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and Canso Credit Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Credit Trust and Power Financial 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 Power Financial Corp are associated (or correlated) with Canso Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Credit Trust has no effect on the direction of Power Financial i.e., Power Financial and Canso Credit go up and down completely randomly.

Pair Corralation between Power Financial and Canso Credit

Assuming the 90 days trading horizon Power Financial is expected to generate 1.8 times less return on investment than Canso Credit. In addition to that, Power Financial is 1.37 times more volatile than Canso Credit Trust. It trades about 0.12 of its total potential returns per unit of risk. Canso Credit Trust is currently generating about 0.29 per unit of volatility. If you would invest  1,591  in Canso Credit Trust on November 25, 2024 and sell it today you would earn a total of  41.00  from holding Canso Credit Trust or generate 2.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Power Financial Corp  vs.  Canso Credit Trust

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 01234
JavaScript chart by amCharts 3.21.15PWF-PG PBY-UN
       Timeline  
Power Financial Corp 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Power Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Power Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb23.82424.224.424.624.825
Canso Credit Trust 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb15.415.615.81616.216.4

Power Financial and Canso Credit Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.79-1.32-0.85-0.380.03940.480.951.421.89 0.51.01.52.02.5
JavaScript chart by amCharts 3.21.15PWF-PG PBY-UN
       Returns  

Pair Trading with Power Financial and Canso Credit

The main advantage of trading using opposite Power Financial and Canso Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial position performs unexpectedly, Canso Credit 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 Canso Credit will offset losses from the drop in Canso Credit's long position.
The idea behind Power Financial Corp and Canso Credit Trust 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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