Correlation Between Visa and Progressive

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

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

Diversification Opportunities for Visa and Progressive

0.78

Correlation Coefficient

Visa  Progressive

Poor diversification

The 3 months correlation between Visa and Progressive is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The Progressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive and Visa 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 Visa Class A are associated (or correlated) with Progressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive has no effect on the direction of Visa i.e., Visa and Progressive go up and down completely randomly.

Pair Corralation between Visa and Progressive

Taking into account the 90-day investment horizon Visa is expected to generate 1.08 times less return on investment than Progressive. But when comparing it to its historical volatility, Visa Class A is 1.49 times less risky than Progressive. It trades about 0.16 of its potential returns per unit of risk. The Progressive is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22,543  in The Progressive on December 29, 2024 and sell it today you would earn a total of  2,707  from holding The Progressive or generate 12.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Visa Class A  vs.  The Progressive

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Progressive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Progressive are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Progressive may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Progressive

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

The idea behind Visa Class A and The Progressive 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.