Correlation Between Sompo Holdings and Progressive Corp

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

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

Diversification Opportunities for Sompo Holdings and Progressive Corp

0.44

Correlation Coefficient

Sompo Holdings  Progressive Corp

Very weak diversification

The 3 months correlation between Sompo and Progressive is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sompo Holdings and Progressive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Corp and Sompo Holdings 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 Sompo Holdings 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 Sompo Holdings i.e., Sompo Holdings and Progressive Corp go up and down completely randomly.

Pair Corralation between Sompo Holdings and Progressive Corp

Assuming the 90 days horizon Sompo Holdings is expected to generate 1.7 times more return on investment than Progressive Corp. However, Sompo Holdings is 1.7 times more volatile than Progressive Corp. It trades about 0.13 of its potential returns per unit of risk. Progressive Corp is currently generating about -0.01 per unit of risk. If you would invest  2,095  in Sompo Holdings on September 15, 2024 and sell it today you would earn a total of  408.00  from holding Sompo Holdings or generate 19.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Sompo Holdings  vs.  Progressive Corp

Sompo Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sompo Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Sompo Holdings reported 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 current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sompo Holdings and Progressive Corp

The main advantage of trading using opposite Sompo Holdings and Progressive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sompo Holdings 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 Sompo Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.