Correlation Between Progressive and Selective Insurance

Can any of the company-specific risk be diversified away by investing in both Progressive and Selective 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 Selective 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 Selective Insurance Group, you can compare the effects of market volatilities on Progressive and Selective 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Progressive and Selective Insurance.

Diversification Opportunities for Progressive and Selective Insurance

-0.11

Correlation Coefficient

Progressive  Selective Insurance

Good diversification

The 3 months correlation between Progressive and Selective is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding The Progressive and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Progressive i.e., Progressive and Selective Insurance go up and down completely randomly.

Pair Corralation between Progressive and Selective Insurance

Assuming the 90 days horizon The Progressive is expected to generate 0.42 times more return on investment than Selective Insurance. However, The Progressive is 2.38 times less risky than Selective Insurance. It trades about 0.05 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.07 per unit of risk. If you would invest  25,249  in The Progressive on November 28, 2024 and sell it today you would earn a total of  991.00  from holding The Progressive or generate 3.92% return on investment over 90 days.

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

The Progressive  vs.  Selective Insurance 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Selective Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Progressive and Selective Insurance

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

The idea behind The Progressive and Selective 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.