Correlation Between National Bank and Chemung Financial

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

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

Diversification Opportunities for National Bank and Chemung Financial

0.71

Correlation Coefficient

National Bank  Chemung Financial

Poor diversification

The 3 months correlation between National and Chemung is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings 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 National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Chemung Financial go up and down completely randomly.

Pair Corralation between National Bank and Chemung Financial

Given the investment horizon of 90 days National Bank Holdings is expected to generate 1.69 times more return on investment than Chemung Financial. However, National Bank is 1.69 times more volatile than Chemung Financial Corp. It trades about 0.03 of its potential returns per unit of risk. Chemung Financial Corp is currently generating about 0.04 per unit of risk. If you would invest  4,185  in National Bank Holdings on September 30, 2024 and sell it today you would earn a total of  132.00  from holding National Bank Holdings or generate 3.15% return on investment over 90 days.

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

National Bank Holdings  vs.  Chemung Financial Corp

National Bank Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, National Bank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Chemung Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 National Bank and Chemung Financial

The main advantage of trading using opposite National Bank and Chemung Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.