Correlation Between Chemung Financial and First Financial

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

Diversification Opportunities for Chemung Financial and First Financial

0.62

Correlation Coefficient

Chemung Financial  First Financial

Poor diversification

The 3 months correlation between Chemung and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chemung Financial Corp and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial has no effect on the direction of Chemung Financial i.e., Chemung Financial and First Financial go up and down completely randomly.

Pair Corralation between Chemung Financial and First Financial

Given the investment horizon of 90 days Chemung Financial is expected to generate 1.5 times less return on investment than First Financial. But when comparing it to its historical volatility, Chemung Financial Corp is 1.17 times less risky than First Financial. It trades about 0.04 of its potential returns per unit of risk. First Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,332  in First Financial on November 27, 2024 and sell it today you would earn a total of  1,760  from holding First Financial or generate 52.82% return on investment over 90 days.

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

Chemung Financial Corp  vs.  First Financial

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.

First Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, First Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chemung Financial and First Financial

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

The idea behind Chemung Financial Corp and First Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.