Correlation Between Progressive Corp and Sompo Holdings

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

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

Diversification Opportunities for Progressive Corp and Sompo Holdings

-0.63

Correlation Coefficient

Progressive Corp  Sompo Holdings

Excellent diversification

The 3 months correlation between Progressive and Sompo is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Progressive Corp and Sompo Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sompo Holdings and Progressive Corp 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 Progressive Corp are associated (or correlated) with Sompo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sompo Holdings has no effect on the direction of Progressive Corp i.e., Progressive Corp and Sompo Holdings go up and down completely randomly.

Pair Corralation between Progressive Corp and Sompo Holdings

Considering the 90-day investment horizon Progressive Corp is expected to generate 5.56 times more return on investment than Sompo Holdings. However, Progressive Corp is 5.56 times more volatile than Sompo Holdings. It trades about 0.01 of its potential returns per unit of risk. Sompo Holdings is currently generating about -0.13 per unit of risk. If you would invest  21,241  in Progressive Corp on March 12, 2024 and sell it today you would earn a total of  12.00  from holding Progressive Corp or generate 0.06% return on investment over 90 days.

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

Progressive Corp  vs.  Sompo Holdings

Progressive Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Progressive Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Progressive Corp may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Sompo Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sompo Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Sompo Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Progressive Corp and Sompo Holdings

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

The idea behind Progressive Corp and Sompo 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.