Correlation Between Main Street and Chemung Financial

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

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

Diversification Opportunities for Main Street and Chemung Financial

0.59

Correlation Coefficient

Main Street  Chemung Financial

Very weak diversification

The 3 months correlation between Main and Chemung is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial 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 Main Street 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 Main Street Financial 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 Main Street i.e., Main Street and Chemung Financial go up and down completely randomly.

Pair Corralation between Main Street and Chemung Financial

Given the investment horizon of 90 days Main Street Financial is expected to generate 0.31 times more return on investment than Chemung Financial. However, Main Street Financial is 3.25 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  1,414  in Main Street Financial on September 21, 2024 and sell it today you would earn a total of  26.00  from holding Main Street Financial or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Main Street Financial  vs.  Chemung Financial Corp

Main Street Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chemung Financial Corp

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Main Street and Chemung Financial

The main advantage of trading using opposite Main Street and Chemung Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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 Main Street Financial 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.