Correlation Between Rush Street and WisdomTree

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

By analyzing existing cross correlation between Rush Street Interactive and WisdomTree, you can compare the effects of market volatilities on Rush Street and WisdomTree 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 Rush Street with a short position of WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rush Street and WisdomTree.

Diversification Opportunities for Rush Street and WisdomTree

0.75

Correlation Coefficient

Rush Street  WisdomTree

Poor diversification

The 3 months correlation between Rush and WisdomTree is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rush Street Interactive and WisdomTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree and Rush Street 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 Rush Street Interactive are associated (or correlated) with WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree has no effect on the direction of Rush Street i.e., Rush Street and WisdomTree go up and down completely randomly.

Pair Corralation between Rush Street and WisdomTree

Considering the 90-day investment horizon Rush Street Interactive is expected to generate 1.94 times more return on investment than WisdomTree. However, Rush Street is 1.94 times more volatile than WisdomTree. It trades about 0.37 of its potential returns per unit of risk. WisdomTree is currently generating about 0.39 per unit of risk. If you would invest  1,040  in Rush Street Interactive on August 28, 2024 and sell it today you would earn a total of  340.00  from holding Rush Street Interactive or generate 32.69% return on investment over 90 days.

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

Rush Street Interactive  vs.  WisdomTree

Rush Street Interactive

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rush Street Interactive are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Rush Street demonstrated solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, WisdomTree unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rush Street and WisdomTree

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

The idea behind Rush Street Interactive and WisdomTree 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.