Correlation Between Bowhead Specialty and Progressive Corp

Can any of the company-specific risk be diversified away by investing in both Bowhead Specialty and Progressive Corp 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 Bowhead Specialty and Progressive Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bowhead Specialty Holdings and Progressive Corp, you can compare the effects of market volatilities on Bowhead Specialty and Progressive Corp 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 Bowhead Specialty with a short position of Progressive Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bowhead Specialty and Progressive Corp.

Diversification Opportunities for Bowhead Specialty and Progressive Corp

0.58

Correlation Coefficient

Bowhead Specialty  Progressive Corp

Very weak diversification

The 3 months correlation between Bowhead and Progressive is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Bowhead Specialty 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 Bowhead Specialty Holdings are associated (or correlated) with Progressive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive Corp has no effect on the direction of Bowhead Specialty i.e., Bowhead Specialty and Progressive Corp go up and down completely randomly.

Pair Corralation between Bowhead Specialty and Progressive Corp

Considering the 90-day investment horizon Bowhead Specialty Holdings is expected to generate 1.56 times more return on investment than Progressive Corp. However, Bowhead Specialty is 1.56 times more volatile than Progressive Corp. It trades about 0.19 of its potential returns per unit of risk. Progressive Corp is currently generating about -0.02 per unit of risk. If you would invest  2,870  in Bowhead Specialty Holdings on September 12, 2024 and sell it today you would earn a total of  767.00  from holding Bowhead Specialty Holdings or generate 26.72% return on investment over 90 days.

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

Bowhead Specialty Holdings  vs.  Progressive Corp

Bowhead Specialty

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Progressive Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Progressive Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Progressive Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bowhead Specialty and Progressive Corp

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

The idea behind Bowhead Specialty Holdings and Progressive 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.