Correlation Between Chemung Financial and ESSA Bancorp

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

Diversification Opportunities for Chemung Financial and ESSA Bancorp

0.81

Correlation Coefficient

Chemung Financial  ESSA Bancorp

Very poor diversification

The 3 months correlation between Chemung and ESSA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Chemung Financial Corp and ESSA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Bancorp 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 ESSA Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Bancorp has no effect on the direction of Chemung Financial i.e., Chemung Financial and ESSA Bancorp go up and down completely randomly.

Pair Corralation between Chemung Financial and ESSA Bancorp

Given the investment horizon of 90 days Chemung Financial is expected to generate 1.02 times less return on investment than ESSA Bancorp. But when comparing it to its historical volatility, Chemung Financial Corp is 1.83 times less risky than ESSA Bancorp. It trades about 0.17 of its potential returns per unit of risk. ESSA Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,765  in ESSA Bancorp on August 16, 2024 and sell it today you would earn a total of  253.00  from holding ESSA Bancorp or generate 14.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Chemung Financial Corp  vs.  ESSA Bancorp

Chemung Financial Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemung Financial Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Chemung Financial reported solid returns over the last few months and may actually be approaching a breakup point.

ESSA Bancorp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESSA Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, ESSA Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chemung Financial and ESSA Bancorp

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

The idea behind Chemung Financial Corp and ESSA Bancorp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.