Correlation Between Progressive and QBE Insurance

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

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

Diversification Opportunities for Progressive and QBE Insurance

0.74

Correlation Coefficient

Progressive  QBE Insurance

Poor diversification

The 3 months correlation between Progressive and QBE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Progressive and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group 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 QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Progressive i.e., Progressive and QBE Insurance go up and down completely randomly.

Pair Corralation between Progressive and QBE Insurance

Assuming the 90 days horizon Progressive is expected to generate 1.16 times less return on investment than QBE Insurance. But when comparing it to its historical volatility, The Progressive is 1.02 times less risky than QBE Insurance. It trades about 0.13 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,117  in QBE Insurance Group on December 30, 2024 and sell it today you would earn a total of  183.00  from holding QBE Insurance Group or generate 16.38% return on investment over 90 days.

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

The Progressive  vs.  QBE Insurance Group

Progressive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Progressive are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Progressive reported solid returns over the last few months and may actually be approaching a breakup point.

QBE Insurance Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Progressive and QBE Insurance

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

The idea behind The Progressive and QBE Insurance 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.