Correlation Between Franklin Financial and Chemung Financial

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

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

Diversification Opportunities for Franklin Financial and Chemung Financial

0.61

Correlation Coefficient

Franklin Financial  Chemung Financial

Poor diversification

The 3 months correlation between Franklin and Chemung is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Financial Services 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 Franklin 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 Franklin Financial Services 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 Franklin Financial i.e., Franklin Financial and Chemung Financial go up and down completely randomly.

Pair Corralation between Franklin Financial and Chemung Financial

Given the investment horizon of 90 days Franklin Financial Services is expected to generate 0.7 times more return on investment than Chemung Financial. However, Franklin Financial Services is 1.44 times less risky than Chemung Financial. It trades about 0.18 of its potential returns per unit of risk. Chemung Financial Corp is currently generating about -0.02 per unit of risk. If you would invest  2,974  in Franklin Financial Services on December 29, 2024 and sell it today you would earn a total of  573.00  from holding Franklin Financial Services or generate 19.27% return on investment over 90 days.

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

Franklin Financial Services  vs.  Chemung Financial Corp

Franklin Financial

Risk-Adjusted Performance

Good

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

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.

Pair Trading with Franklin Financial and Chemung Financial

The main advantage of trading using opposite Franklin Financial and Chemung Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Financial 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 Franklin Financial Services 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.