Correlation Between Regional Management and MFS Government

Can any of the company-specific risk be diversified away by investing in both Regional Management and MFS Government 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 Regional Management and MFS Government into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Regional Management Corp and MFS Government Markets, you can compare the effects of market volatilities on Regional Management and MFS Government 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 Regional Management with a short position of MFS Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and MFS Government.

Diversification Opportunities for Regional Management and MFS Government

0.64

Correlation Coefficient

Regional Management  MFS Government

Poor diversification

The 3 months correlation between Regional and MFS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and MFS Government Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Government Markets and Regional Management 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 Regional Management Corp are associated (or correlated) with MFS Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Government Markets has no effect on the direction of Regional Management i.e., Regional Management and MFS Government go up and down completely randomly.

Pair Corralation between Regional Management and MFS Government

Allowing for the 90-day total investment horizon Regional Management Corp is expected to generate 3.16 times more return on investment than MFS Government. However, Regional Management is 3.16 times more volatile than MFS Government Markets. It trades about 0.15 of its potential returns per unit of risk. MFS Government Markets is currently generating about 0.03 per unit of risk. If you would invest  2,717  in Regional Management Corp on May 5, 2025 and sell it today you would earn a total of  564.00  from holding Regional Management Corp or generate 20.76% return on investment over 90 days.

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

Regional Management Corp  vs.  MFS Government Markets

Regional Management Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Management Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Regional Management displayed solid returns over the last few months and may actually be approaching a breakup point.

MFS Government Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Government Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Regional Management and MFS Government

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

The idea behind Regional Management Corp and MFS Government Markets 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 Stocks Directory module to find actively traded stocks across global markets.