Correlation Between KeyCorp and Chemung Financial

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

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

Diversification Opportunities for KeyCorp and Chemung Financial

0.25

Correlation Coefficient

KeyCorp  Chemung Financial

Modest diversification

The 3 months correlation between KeyCorp and Chemung is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp 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 KeyCorp 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 KeyCorp 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 KeyCorp i.e., KeyCorp and Chemung Financial go up and down completely randomly.

Pair Corralation between KeyCorp and Chemung Financial

Assuming the 90 days trading horizon KeyCorp is expected to generate 0.28 times more return on investment than Chemung Financial. However, KeyCorp is 3.52 times less risky than Chemung Financial. It trades about 0.02 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  2,395  in KeyCorp on December 30, 2024 and sell it today you would earn a total of  15.00  from holding KeyCorp or generate 0.63% return on investment over 90 days.

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

KeyCorp  vs.  Chemung Financial Corp

KeyCorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, KeyCorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 KeyCorp and Chemung Financial

The main advantage of trading using opposite KeyCorp and Chemung Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KeyCorp 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 KeyCorp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.