Correlation Between Etherfi and XRP
Can any of the company-specific risk be diversified away by investing in both Etherfi and XRP 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 Etherfi and XRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etherfi and XRP, you can compare the effects of market volatilities on Etherfi and XRP 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 Etherfi with a short position of XRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etherfi and XRP.
Diversification Opportunities for Etherfi and XRP
Very poor diversification
The 3 months correlation between Etherfi and XRP is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Etherfi and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Etherfi 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 Etherfi are associated (or correlated) with XRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XRP has no effect on the direction of Etherfi i.e., Etherfi and XRP go up and down completely randomly.
Pair Corralation between Etherfi and XRP
Assuming the 90 days trading horizon Etherfi is expected to generate 2.1 times less return on investment than XRP. In addition to that, Etherfi is 1.05 times more volatile than XRP. It trades about 0.28 of its total potential returns per unit of risk. XRP is currently generating about 0.61 per unit of volatility. If you would invest 51.00 in XRP on August 31, 2024 and sell it today you would earn a total of 103.00 from holding XRP or generate 201.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Etherfi vs. XRP
Performance |
| Timeline |
| Etherfi |
| XRP |
Etherfi and XRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Etherfi and XRP
The main advantage of trading using opposite Etherfi and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etherfi position performs unexpectedly, XRP 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 XRP will offset losses from the drop in XRP's long position.The idea behind Etherfi and XRP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |