Correlation Between NI Holdings and Progressive Corp

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

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

Diversification Opportunities for NI Holdings and Progressive Corp

-0.8

Correlation Coefficient

NI Holdings  Progressive Corp

Pay attention - limited upside

The 3 months correlation between NODK and Progressive is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and NI Holdings 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 NI 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 NI Holdings i.e., NI Holdings and Progressive Corp go up and down completely randomly.

Pair Corralation between NI Holdings and Progressive Corp

Given the investment horizon of 90 days NI Holdings is expected to under-perform the Progressive Corp. In addition to that, NI Holdings is 1.18 times more volatile than Progressive Corp. It trades about -0.09 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 29, 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	Significant
Accuracy	100.0%
Values	Daily Returns

NI Holdings  vs.  Progressive Corp

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 NI Holdings and Progressive Corp

The main advantage of trading using opposite NI Holdings and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.