Correlation Between First Mid and Chemung Financial

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

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

Diversification Opportunities for First Mid and Chemung Financial

0.86

Correlation Coefficient

First Mid  Chemung Financial

Very poor diversification

The 3 months correlation between First and Chemung is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Mid Illinois and Chemung Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemung Financial Corp and First Mid 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 First Mid Illinois are associated (or correlated) with Chemung Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemung Financial Corp has no effect on the direction of First Mid i.e., First Mid and Chemung Financial go up and down completely randomly.

Pair Corralation between First Mid and Chemung Financial

Given the investment horizon of 90 days First Mid is expected to generate 1.72 times less return on investment than Chemung Financial. In addition to that, First Mid is 1.69 times more volatile than Chemung Financial Corp. It trades about 0.06 of its total potential returns per unit of risk. Chemung Financial Corp is currently generating about 0.19 per unit of volatility. If you would invest  4,636  in Chemung Financial Corp on September 12, 2024 and sell it today you would earn a total of  814.00  from holding Chemung Financial Corp or generate 17.56% return on investment over 90 days.

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

First Mid Illinois  vs.  Chemung Financial Corp

First Mid Illinois

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Mid Illinois are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, First Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chemung Financial Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Chemung Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Mid and Chemung Financial

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

The idea behind First Mid Illinois and Chemung Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.