Correlation Between Progressive and Insurance Australia

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

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

Diversification Opportunities for Progressive and Insurance Australia

-0.4

Correlation Coefficient

Progressive  Insurance Australia

Very good diversification

The 3 months correlation between Progressive and Insurance is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Progressive and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia and Progressive 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 The Progressive are associated (or correlated) with Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Progressive i.e., Progressive and Insurance Australia go up and down completely randomly.

Pair Corralation between Progressive and Insurance Australia

Assuming the 90 days horizon The Progressive is expected to generate 0.63 times more return on investment than Insurance Australia. However, The Progressive is 1.59 times less risky than Insurance Australia. It trades about 0.05 of its potential returns per unit of risk. Insurance Australia Group is currently generating about -0.04 per unit of risk. If you would invest  25,121  in The Progressive on November 29, 2024 and sell it today you would earn a total of  1,059  from holding The Progressive or generate 4.22% return on investment over 90 days.

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

The Progressive  vs.  Insurance Australia Group

Progressive

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Progressive are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Progressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Progressive and Insurance Australia

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

The idea behind The Progressive and Insurance Australia Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.