Correlation Between CNA Financial and Progressive Corp

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

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

Diversification Opportunities for CNA Financial and Progressive Corp

0.54

Correlation Coefficient

CNA Financial  Progressive Corp

Very weak diversification

The 3 months correlation between CNA and Progressive is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and CNA Financial 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 CNA Financial 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 CNA Financial i.e., CNA Financial and Progressive Corp go up and down completely randomly.

Pair Corralation between CNA Financial and Progressive Corp

Considering the 90-day investment horizon CNA Financial is expected to under-perform the Progressive Corp. But the stock apears to be less risky and, when comparing its historical volatility, CNA Financial is 1.05 times less risky than Progressive Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Progressive Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  25,621  in Progressive Corp on September 15, 2024 and sell it today you would lose (441.00) from holding Progressive Corp or give up 1.72% of portfolio value over 90 days.

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

CNA Financial  vs.  Progressive Corp

CNA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNA Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 CNA Financial and Progressive Corp

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.