Correlation Between Chemung Financial and 1st Source

Can any of the company-specific risk be diversified away by investing in both Chemung Financial and 1st Source 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 Chemung Financial and 1st Source into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chemung Financial Corp and 1st Source, you can compare the effects of market volatilities on Chemung Financial and 1st Source 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 Chemung Financial with a short position of 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemung Financial and 1st Source.

Diversification Opportunities for Chemung Financial and 1st Source

0.91

Correlation Coefficient

Chemung Financial  1st Source

Almost no diversification

The 3 months correlation between Chemung and 1st is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Chemung Financial Corp and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source and Chemung 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 Chemung Financial Corp are associated (or correlated) with 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of Chemung Financial i.e., Chemung Financial and 1st Source go up and down completely randomly.

Pair Corralation between Chemung Financial and 1st Source

Given the investment horizon of 90 days Chemung Financial Corp is expected to generate 0.61 times more return on investment than 1st Source. However, Chemung Financial Corp is 1.63 times less risky than 1st Source. It trades about 0.14 of its potential returns per unit of risk. 1st Source is currently generating about 0.06 per unit of risk. If you would invest  4,637  in Chemung Financial Corp on August 31, 2024 and sell it today you would earn a total of  546.00  from holding Chemung Financial Corp or generate 11.77% return on investment over 90 days.

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

Chemung Financial Corp  vs.  1st Source

Chemung Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chemung Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

1st Source

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Source are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, 1st Source may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chemung Financial and 1st Source

The main advantage of trading using opposite Chemung Financial and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemung Financial position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source's long position.

The idea behind Chemung Financial Corp and 1st Source 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.