Correlation Between Mastercard and Progressive Corp
Can any of the company-specific risk be diversified away by investing in both Mastercard and Progressive Corp 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 Mastercard and Progressive Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Progressive Corp, you can compare the effects of market volatilities on Mastercard and Progressive Corp 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 Mastercard with a short position of Progressive Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Progressive Corp.
Diversification Opportunities for Mastercard and Progressive Corp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mastercard and Progressive is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Mastercard 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 Mastercard are associated (or correlated) with Progressive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive Corp has no effect on the direction of Mastercard i.e., Mastercard and Progressive Corp go up and down completely randomly.
Pair Corralation between Mastercard and Progressive Corp
Allowing for the 90-day total investment horizon Mastercard is expected to under-perform the Progressive Corp. But the stock apears to be less risky and, when comparing its historical volatility, Mastercard is 1.33 times less risky than Progressive Corp. The stock trades about -0.38 of its potential returns per unit of risk. The Progressive Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 20,562 in Progressive Corp on January 20, 2024 and sell it today you would earn a total of 907.00 from holding Progressive Corp or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. Progressive Corp
Performance |
| Timeline |
| Mastercard |
| Progressive Corp |
Mastercard and Progressive Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Progressive Corp
The main advantage of trading using opposite Mastercard and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Progressive Corp 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 Corp will offset losses from the drop in Progressive Corp's long position.| Mastercard vs. American Express | Mastercard vs. Capital One Financial | Mastercard vs. Upstart HoldingsInc | Mastercard vs. Ally Financial |
| Progressive Corp vs. The Travelers Companies | Progressive Corp vs. Chubb | Progressive Corp vs. Cincinnati Financial | Progressive Corp vs. W R Berkley |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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