Correlation Between Rush Street and Light Wonder

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

Diversification Opportunities for Rush Street and Light Wonder

-0.62

Correlation Coefficient

Rush Street  Light Wonder

Excellent diversification

The 3 months correlation between Rush and Light is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rush Street Interactive and Light Wonder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Wonder 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 Light Wonder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Wonder has no effect on the direction of Rush Street i.e., Rush Street and Light Wonder go up and down completely randomly.

Pair Corralation between Rush Street and Light Wonder

Considering the 90-day investment horizon Rush Street Interactive is expected to under-perform the Light Wonder. In addition to that, Rush Street is 1.75 times more volatile than Light Wonder. It trades about -0.07 of its total potential returns per unit of risk. Light Wonder is currently generating about 0.15 per unit of volatility. If you would invest  8,603  in Light Wonder on December 27, 2024 and sell it today you would earn a total of  1,946  from holding Light Wonder or generate 22.62% return on investment over 90 days.

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

Rush Street Interactive  vs.  Light Wonder

Rush Street Interactive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rush Street Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Light Wonder

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Light Wonder are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Light Wonder showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rush Street and Light Wonder

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

The idea behind Rush Street Interactive and Light Wonder 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 Anywhere module to track or share privately all of your investments from the convenience of any device.