Correlation Between Chemung Financial and Financial Institutions

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

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

Diversification Opportunities for Chemung Financial and Financial Institutions

0.82

Correlation Coefficient

Chemung Financial  Financial Institutions

Very poor diversification

The 3 months correlation between Chemung and Financial is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Chemung Financial Corp and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions and Chemung 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 Chemung Financial Corp are associated (or correlated) with Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Chemung Financial i.e., Chemung Financial and Financial Institutions go up and down completely randomly.

Pair Corralation between Chemung Financial and Financial Institutions

Given the investment horizon of 90 days Chemung Financial is expected to generate 2.17 times less return on investment than Financial Institutions. But when comparing it to its historical volatility, Chemung Financial Corp is 1.72 times less risky than Financial Institutions. It trades about 0.04 of its potential returns per unit of risk. Financial Institutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,520  in Financial Institutions on September 30, 2024 and sell it today you would earn a total of  181.00  from holding Financial Institutions or generate 7.18% return on investment over 90 days.

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

Chemung Financial Corp  vs.  Financial Institutions

Chemung Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Chemung Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Financial Institutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Institutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Financial Institutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chemung Financial and Financial Institutions

The main advantage of trading using opposite Chemung Financial and Financial Institutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemung Financial position performs unexpectedly, Financial Institutions 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 Financial Institutions will offset losses from the drop in Financial Institutions' long position.

The idea behind Chemung Financial Corp and Financial Institutions 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.