Correlation Between Rush Street and Aristocrat Leisure

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

Diversification Opportunities for Rush Street and Aristocrat Leisure

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Rush and Aristocrat is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rush Street Interactive and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Rush Street i.e., Rush Street and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Rush Street and Aristocrat Leisure

Considering the 90-day investment horizon Rush Street Interactive is expected to generate 1.92 times more return on investment than Aristocrat Leisure. However, Rush Street is 1.92 times more volatile than Aristocrat Leisure Limited. It trades about 0.14 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.22 per unit of risk. If you would invest  895.00  in Rush Street Interactive on August 29, 2024 and sell it today you would earn a total of  526.00  from holding Rush Street Interactive or generate 58.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy97.67%
ValuesDaily Returns

Rush Street Interactive  vs.  Aristocrat Leisure Limited

 Performance 
       Timeline  
Rush Street Interactive 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Rush Street Interactive are ranked lower than 19 (%) 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.
Aristocrat Leisure 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aristocrat Leisure reported solid returns over the last few months and may actually be approaching a breakup point.

Rush Street and Aristocrat Leisure Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rush Street and Aristocrat Leisure

The main advantage of trading using opposite Rush Street and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rush Street position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.
The idea behind Rush Street Interactive and Aristocrat Leisure Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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