Correlation Between Power Financial and Algoma Central

Can any of the company-specific risk be diversified away by investing in both Power Financial and Algoma Central 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 Algoma Central 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 Algoma Central, you can compare the effects of market volatilities on Power Financial and Algoma Central 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 Algoma Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Algoma Central.

Diversification Opportunities for Power Financial and Algoma Central

0.88

Correlation Coefficient

Power Financial  Algoma Central

Very poor diversification

The 3 months correlation between Power and Algoma is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central 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 Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of Power Financial i.e., Power Financial and Algoma Central go up and down completely randomly.

Pair Corralation between Power Financial and Algoma Central

Assuming the 90 days trading horizon Power Financial Corp is expected to generate 0.56 times more return on investment than Algoma Central. However, Power Financial Corp is 1.78 times less risky than Algoma Central. It trades about 0.3 of its potential returns per unit of risk. Algoma Central is currently generating about 0.15 per unit of risk. If you would invest  2,063  in Power Financial Corp on April 25, 2025 and sell it today you would earn a total of  181.00  from holding Power Financial Corp or generate 8.77% return on investment over 90 days.

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

Power Financial Corp  vs.  Algoma Central

Power Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Power Financial Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Power Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Algoma Central

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Algoma Central are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Algoma Central may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Power Financial and Algoma Central

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

The idea behind Power Financial Corp and Algoma Central 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.