Correlation Between Progressive Corp and NI Holdings

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

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

Diversification Opportunities for Progressive Corp and NI Holdings

-0.8

Correlation Coefficient

Progressive Corp  NI Holdings

Pay attention - limited upside

The 3 months correlation between Progressive and NODK is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Progressive Corp and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Progressive Corp 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 Progressive Corp are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Progressive Corp i.e., Progressive Corp and NI Holdings go up and down completely randomly.

Pair Corralation between Progressive Corp and NI Holdings

Considering the 90-day investment horizon Progressive Corp is expected to generate 0.85 times more return on investment than NI Holdings. However, Progressive Corp is 1.18 times less risky than NI Holdings. It trades about 0.22 of its potential returns per unit of risk. NI Holdings is currently generating about -0.09 per unit of risk. 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

Progressive Corp  vs.  NI Holdings

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.

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.

Pair Trading with Progressive Corp and NI Holdings

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

The idea behind Progressive Corp and NI Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.