Risk-Off canonicalization is what happens when a strategy's Risk-Off allocation profile is configured identically to its Risk-On profile: the switch has nothing to change, so a triggered risk condition has no visible effect and the backtest matches one with no risk condition at all. The condition is not broken; there is simply no difference to switch into.
Also seen as: identical-profile no-op
How does Fincanva handle it?
- For a flip to change anything, the two profiles must differ in something the allocation uses: the weighting method, that method's parameters, or the profile's calculation window. At the strategy level a different leverage also counts; at the Combined level, a different invested portion.
- The profile's name ("Risk-On" / "Risk-Off") is a label, not a setting, so two profiles that differ only by name are identical.
- Matching profiles make the condition a no-op: the strategy behaves as if it had no risk condition, even though the condition is configured and active.
What does it look like in practice?
A strategy runs Equal weights, no leverage, in Risk-On. You add a risk condition on a volatility index and set the Risk-Off profile to Equal weights, no leverage — the same thing. Fincanva shows the alert below. You back-test through a downturn in which the condition triggers for four months. The equity curve is identical to the same strategy with no condition at all: through those four months it still held the same instruments, at the same weights, with the same exposure.
Lower the Risk-Off exposure, or pick a different method for Risk-Off, and the two backtests diverge from the first trigger onward — that difference is the entire effect of the risk condition.
Why does nothing change when the condition fires?
Going Risk-Off means swapping one allocation profile for another. If both profiles carry the same weighting method with the same settings, the swap replaces a profile with its twin, and the holdings that come out are the ones that were already there. The regime still flips — the strategy is genuinely in its Risk-Off state — but nothing about what it holds, or about the equity curve, differs from the Risk-On state.
How does Fincanva flag identical profiles?
The app raises a strategy alert to review: "When the risk condition triggers, nothing changes, because Risk-Off is the same as Risk-On. Change the Risk-Off allocation, or leave it if that is intended." It appears once risk conditions are active and both profiles are materially the same, and the Risk-Off profile reads "Same as Risk-On: the regime change does not change the allocation". The backtest still runs; make the two profiles differ, or press Leave as is if an identical Risk-Off is a deliberate placeholder.
That is a different situation from a Risk-Off profile that was never picked at all, which shows the harder error "Risk-Off allocation needs to be set" — "Risk conditions are active, but no Risk-Off allocation method has been picked yet. Choose one below so the strategy knows what to do when a risk condition triggers."