Correlation Between Chemung Financial and National Bank

Can any of the company-specific risk be diversified away by investing in both Chemung Financial and National Bank 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 National Bank 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 National Bank Holdings, you can compare the effects of market volatilities on Chemung Financial and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemung Financial and National Bank.

Diversification Opportunities for Chemung Financial and National Bank

0.71

Correlation Coefficient

Chemung Financial  National Bank

Poor diversification

The 3 months correlation between Chemung and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chemung Financial Corp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Chemung Financial i.e., Chemung Financial and National Bank go up and down completely randomly.

Pair Corralation between Chemung Financial and National Bank

Given the investment horizon of 90 days Chemung Financial Corp is expected to generate 1.05 times more return on investment than National Bank. However, Chemung Financial is 1.05 times more volatile than National Bank Holdings. It trades about -0.15 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.32 per unit of risk. If you would invest  5,201  in Chemung Financial Corp on September 30, 2024 and sell it today you would lose (261.00) from holding Chemung Financial Corp or give up 5.02% of portfolio value over 90 days.

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

Chemung Financial Corp  vs.  National Bank Holdings

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.

National Bank Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, National Bank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chemung Financial and National Bank

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

The idea behind Chemung Financial Corp and National Bank Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.