Correlation Between National Bankshares and Chemung Financial

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Can any of the company-specific risk be diversified away by investing in both National Bankshares 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 Bankshares 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 Bankshares and Chemung Financial Corp, you can compare the effects of market volatilities on National Bankshares 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 Bankshares with a short position of Chemung Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bankshares and Chemung Financial.

Diversification Opportunities for National Bankshares and Chemung Financial

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between National and Chemung is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding National Bankshares 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 Bankshares 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 Bankshares 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 Bankshares i.e., National Bankshares and Chemung Financial go up and down completely randomly.

Pair Corralation between National Bankshares and Chemung Financial

Given the investment horizon of 90 days National Bankshares is expected to generate 0.99 times more return on investment than Chemung Financial. However, National Bankshares is 1.01 times less risky than Chemung Financial. It trades about 0.35 of its potential returns per unit of risk. Chemung Financial Corp is currently generating about 0.23 per unit of risk. If you would invest  2,788  in National Bankshares on September 1, 2024 and sell it today you would earn a total of  422.00  from holding National Bankshares or generate 15.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

National Bankshares  vs.  Chemung Financial Corp

 Performance 
       Timeline  
National Bankshares 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in National Bankshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, National Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Chemung Financial Corp 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Chemung Financial reported solid returns over the last few months and may actually be approaching a breakup point.

National Bankshares and Chemung Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Bankshares and Chemung Financial

The main advantage of trading using opposite National Bankshares and Chemung Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bankshares 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 Bankshares 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.
Check out your portfolio center.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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