Correlation Between Progressive and United Insurance
Can any of the company-specific risk be diversified away by investing in both Progressive and United 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 United 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 United Insurance Holdings, you can compare the effects of market volatilities on Progressive and United 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 United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Progressive and United Insurance.
Diversification Opportunities for Progressive and United Insurance
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Progressive and United is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Progressive and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings 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 United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of Progressive i.e., Progressive and United Insurance go up and down completely randomly.
Pair Corralation between Progressive and United Insurance
Assuming the 90 days horizon Progressive is expected to generate 1.12 times less return on investment than United Insurance. But when comparing it to its historical volatility, The Progressive is 1.9 times less risky than United Insurance. It trades about 0.34 of its potential returns per unit of risk. United Insurance Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,100 in United Insurance Holdings on September 1, 2024 and sell it today you would earn a total of 180.00 from holding United Insurance Holdings or generate 16.36% 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. United Insurance Holdings
Performance |
| Timeline |
| Progressive |
| United Insurance Holdings |
Progressive and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Progressive and United Insurance
The main advantage of trading using opposite Progressive and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Progressive position performs unexpectedly, United 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 United Insurance will offset losses from the drop in United Insurance's long position.The idea behind The Progressive and United Insurance Holdings 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.| United Insurance vs. The Progressive | United Insurance vs. Fairfax Financial Holdings | United Insurance vs. Insurance Australia Group |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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