Correlation Between White Mountains and Progressive Corp

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

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

Diversification Opportunities for White Mountains and Progressive Corp

0.36

Correlation Coefficient

White Mountains  Progressive Corp

Weak diversification

The 3 months correlation between White and Progressive is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and White Mountains 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 White Mountains Insurance 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 White Mountains i.e., White Mountains and Progressive Corp go up and down completely randomly.

Pair Corralation between White Mountains and Progressive Corp

Considering the 90-day investment horizon White Mountains is expected to generate 1.81 times less return on investment than Progressive Corp. But when comparing it to its historical volatility, White Mountains Insurance is 1.06 times less risky than Progressive Corp. It trades about 0.05 of its potential returns per unit of risk. Progressive Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,347  in Progressive Corp on September 27, 2024 and sell it today you would earn a total of  10,923  from holding Progressive Corp or generate 81.84% return on investment over 90 days.

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

White Mountains Insurance  vs.  Progressive Corp

White Mountains Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in White Mountains Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, White Mountains displayed solid returns over the last few months and may actually be approaching a breakup point.

Progressive Corp

Risk-Adjusted Performance

0 of 100

Very 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 White Mountains and Progressive Corp

The main advantage of trading using opposite White Mountains and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Mountains 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 White Mountains Insurance 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.