Correlation Between Fairfax Financial and Progressive
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial 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 Fairfax Financial and Progressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and The Progressive, you can compare the effects of market volatilities on Fairfax Financial 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 Fairfax Financial with a short position of Progressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Progressive.
Diversification Opportunities for Fairfax Financial and Progressive
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Progressive is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and The Progressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive and Fairfax Financial 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 Fairfax Financial Holdings 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 Fairfax Financial i.e., Fairfax Financial and Progressive go up and down completely randomly.
Pair Corralation between Fairfax Financial and Progressive
Assuming the 90 days horizon Fairfax Financial is expected to generate 1.17 times less return on investment than Progressive. But when comparing it to its historical volatility, Fairfax Financial Holdings is 1.08 times less risky than Progressive. It trades about 0.11 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 12,076 in The Progressive on August 31, 2024 and sell it today you would earn a total of 13,679 from holding The Progressive or generate 113.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. The Progressive
Performance |
| Timeline |
| Fairfax Financial |
| Progressive |
Fairfax Financial and Progressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Progressive
The main advantage of trading using opposite Fairfax Financial and Progressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial 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.| Fairfax Financial vs. Constellation Software | Fairfax Financial vs. Alfa Financial Software | Fairfax Financial vs. AXWAY SOFTWARE EO | Fairfax Financial vs. NORWEGIAN AIR SHUT |
Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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