Correlation Between Progressive Corp and Travelers Companies

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

Diversification Opportunities for Progressive Corp and Travelers Companies

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Progressive and Travelers is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Progressive Corp and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Progressive Corp i.e., Progressive Corp and Travelers Companies go up and down completely randomly.

Pair Corralation between Progressive Corp and Travelers Companies

Considering the 90-day investment horizon Progressive Corp is expected to generate 1.44 times more return on investment than Travelers Companies. However, Progressive Corp is 1.44 times more volatile than The Travelers Companies. It trades about 0.09 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.11 per unit of risk. If you would invest  12,910  in Progressive Corp on September 9, 2022 and sell it today you would earn a total of  328.50  from holding Progressive Corp or generate 2.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Progressive Corp  vs.  The Travelers Companies

 Performance (%) 
       Timeline  
Progressive Corp 
Progressive Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Progressive Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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

The Travelers Companies 
Travelers Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Travelers Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Travelers Price Channel

Progressive Corp and Travelers Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Progressive Corp and Travelers Companies

The main advantage of trading using opposite Progressive Corp and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Progressive Corp position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.
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The idea behind Progressive Corp and The Travelers Companies 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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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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