Correlation Between Chemung Financial and 1st Source

Can any of the company-specific risk be diversified away by investing in both Chemung Financial and 1st Source 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 1st Source 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 1st Source, you can compare the effects of market volatilities on Chemung Financial and 1st Source 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 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemung Financial and 1st Source.

Diversification Opportunities for Chemung Financial and 1st Source

0.81

Correlation Coefficient

Chemung Financial  1st Source

Very poor diversification

The 3 months correlation between Chemung and 1st is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Chemung Financial Corp and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source 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 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of Chemung Financial i.e., Chemung Financial and 1st Source go up and down completely randomly.

Pair Corralation between Chemung Financial and 1st Source

Given the investment horizon of 90 days Chemung Financial Corp is expected to under-perform the 1st Source. In addition to that, Chemung Financial is 1.42 times more volatile than 1st Source. It trades about -0.01 of its total potential returns per unit of risk. 1st Source is currently generating about 0.06 per unit of volatility. If you would invest  5,827  in 1st Source on December 28, 2024 and sell it today you would earn a total of  301.00  from holding 1st Source or generate 5.17% 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.  1st Source

Chemung Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemung Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

1st Source

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Source are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, 1st Source is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chemung Financial and 1st Source

The main advantage of trading using opposite Chemung Financial and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemung Financial position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source's long position.

The idea behind Chemung Financial Corp and 1st Source 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..