Correlation Between Allstate Corp and Progressive Corp

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Can any of the company-specific risk be diversified away by investing in both Allstate Corp 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 Allstate Corp and Progressive Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allstate Corp and Progressive Corp, you can compare the effects of market volatilities on Allstate Corp 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 Allstate Corp with a short position of Progressive Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate Corp and Progressive Corp.

Diversification Opportunities for Allstate Corp and Progressive Corp

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Allstate and Progressive is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Allstate Corp and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Allstate 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 Allstate Corp 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 Allstate Corp i.e., Allstate Corp and Progressive Corp go up and down completely randomly.

Pair Corralation between Allstate Corp and Progressive Corp

Considering the 90-day investment horizon Allstate Corp is expected to generate 1.28 times more return on investment than Progressive Corp. However, Allstate Corp is 1.28 times more volatile than Progressive Corp. It trades about 0.12 of its potential returns per unit of risk. Progressive Corp is currently generating about 0.09 per unit of risk. If you would invest  11,616  in Allstate Corp on July 1, 2022 and sell it today you would earn a total of  1,025  from holding Allstate Corp or generate 8.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Allstate Corp  vs.  Progressive Corp

 Performance (%) 
       Timeline  
Allstate Corp 
Allstate Performance
0 of 100
Over the last 90 days Allstate Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady essential indicators, Allstate Corp is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Allstate Price Channel

Progressive Corp 
Progressive Performance
0 of 100
Over the last 90 days Progressive Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Progressive Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Progressive Price Channel

Allstate Corp and Progressive Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Allstate Corp and Progressive Corp

The main advantage of trading using opposite Allstate Corp and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate Corp 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.
Allstate Corp vs. Amazon Inc
The idea behind Allstate Corp 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.
Progressive Corp vs. Amazon Inc
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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