Correlation Between Canadian Utilities and IDEX Metals

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

Diversification Opportunities for Canadian Utilities and IDEX Metals

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Canadian and IDEX is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and IDEX Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX Metals Corp and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with IDEX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX Metals Corp has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and IDEX Metals go up and down completely randomly.

Pair Corralation between Canadian Utilities and IDEX Metals

Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.2 times more return on investment than IDEX Metals. However, Canadian Utilities Limited is 5.0 times less risky than IDEX Metals. It trades about 0.07 of its potential returns per unit of risk. IDEX Metals Corp is currently generating about -0.03 per unit of risk. If you would invest  3,748  in Canadian Utilities Limited on April 23, 2025 and sell it today you would earn a total of  108.00  from holding Canadian Utilities Limited or generate 2.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy46.77%
ValuesDaily Returns

Canadian Utilities Limited  vs.  IDEX Metals Corp

 Performance 
       Timeline  
Canadian Utilities 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canadian Utilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
IDEX Metals Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days IDEX Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, IDEX Metals is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Canadian Utilities and IDEX Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canadian Utilities and IDEX Metals

The main advantage of trading using opposite Canadian Utilities and IDEX Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, IDEX Metals 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 IDEX Metals will offset losses from the drop in IDEX Metals' long position.
The idea behind Canadian Utilities Limited and IDEX Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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