Correlation Between Global Indemnity and Progressive Corp

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

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

Diversification Opportunities for Global Indemnity and Progressive Corp

-0.18

Correlation Coefficient

Global Indemnity  Progressive Corp

Good diversification

The 3 months correlation between Global and Progressive is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Global Indemnity 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 Global Indemnity PLC 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 Global Indemnity i.e., Global Indemnity and Progressive Corp go up and down completely randomly.

Pair Corralation between Global Indemnity and Progressive Corp

Given the investment horizon of 90 days Global Indemnity PLC is expected to under-perform the Progressive Corp. In addition to that, Global Indemnity is 1.6 times more volatile than Progressive Corp. It trades about -0.03 of its total potential returns per unit of risk. Progressive Corp is currently generating about 0.22 per unit of volatility. If you would invest  23,492  in Progressive Corp on December 30, 2024 and sell it today you would earn a total of  4,394  from holding Progressive Corp or generate 18.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Global Indemnity PLC  vs.  Progressive Corp

Global Indemnity PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Indemnity PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Global Indemnity is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Progressive Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Progressive Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Progressive Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Indemnity and Progressive Corp

The main advantage of trading using opposite Global Indemnity and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Indemnity 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 Global Indemnity PLC 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.