Correlation Between Allstate and Progressive Corp

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

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

Diversification Opportunities for Allstate and Progressive Corp

0.8

Correlation Coefficient

Allstate  Progressive Corp

Very poor diversification

The 3 months correlation between Allstate and Progressive is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Allstate 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 The Allstate 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 i.e., Allstate and Progressive Corp go up and down completely randomly.

Pair Corralation between Allstate and Progressive Corp

Considering the 90-day investment horizon Allstate is expected to generate 1.47 times less return on investment than Progressive Corp. But when comparing it to its historical volatility, The Allstate is 1.07 times less risky than Progressive Corp. It trades about 0.07 of its potential returns per unit of risk. Progressive Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,601  in Progressive Corp on September 10, 2024 and sell it today you would earn a total of  12,185  from holding Progressive Corp or generate 96.7% return on investment over 90 days.

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

The Allstate  vs.  Progressive Corp

Allstate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Progressive Corp

Risk-Adjusted Performance

0 of 100

Weak

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.

Pair Trading with Allstate and Progressive Corp

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

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.