Correlation Between Old Republic and Progressive Corp

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

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

Diversification Opportunities for Old Republic and Progressive Corp

0.66

Correlation Coefficient

Old Republic  Progressive Corp

Poor diversification

The 3 months correlation between Old and Progressive is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Progressive Corp go up and down completely randomly.

Pair Corralation between Old Republic and Progressive Corp

Considering the 90-day investment horizon Old Republic is expected to generate 3.22 times less return on investment than Progressive Corp. In addition to that, Old Republic is 1.06 times more volatile than Progressive Corp. It trades about 0.05 of its total potential returns per unit of risk. Progressive Corp is currently generating about 0.17 per unit of volatility. If you would invest  20,592  in Progressive Corp on January 25, 2024 and sell it today you would earn a total of  810.00  from holding Progressive Corp or generate 3.93% return on investment over 90 days.

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

Old Republic International  vs.  Progressive Corp

Old Republic Interna

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Progressive Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Progressive Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Progressive Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Republic and Progressive Corp

The main advantage of trading using opposite Old Republic and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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.

The idea behind Old Republic International and Progressive Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.