Correlation Between ESSA Bancorp and Chemung Financial

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Can any of the company-specific risk be diversified away by investing in both ESSA Bancorp 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 ESSA Bancorp and Chemung Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Bancorp and Chemung Financial Corp, you can compare the effects of market volatilities on ESSA Bancorp 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 ESSA Bancorp with a short position of Chemung Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Bancorp and Chemung Financial.

Diversification Opportunities for ESSA Bancorp and Chemung Financial

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between ESSA and Chemung is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Bancorp 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 ESSA Bancorp 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 ESSA Bancorp 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 ESSA Bancorp i.e., ESSA Bancorp and Chemung Financial go up and down completely randomly.

Pair Corralation between ESSA Bancorp and Chemung Financial

Given the investment horizon of 90 days ESSA Bancorp is expected to generate 1.36 times more return on investment than Chemung Financial. However, ESSA Bancorp is 1.36 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 0.02 per unit of risk. If you would invest  1,816  in ESSA Bancorp on November 21, 2024 and sell it today you would earn a total of  348.00  from holding ESSA Bancorp or generate 19.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

ESSA Bancorp  vs.  Chemung Financial Corp

 Performance 
       Timeline  
ESSA Bancorp 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, ESSA Bancorp may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Chemung Financial Corp 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 2 (%) 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.

ESSA Bancorp and Chemung Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ESSA Bancorp and Chemung Financial

The main advantage of trading using opposite ESSA Bancorp and Chemung Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Bancorp 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 ESSA Bancorp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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