Correlation Between Frax Share and XRP
Can any of the company-specific risk be diversified away by investing in both Frax Share 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 Frax Share and XRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frax Share and XRP, you can compare the effects of market volatilities on Frax Share 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 Frax Share with a short position of XRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frax Share and XRP.
Diversification Opportunities for Frax Share and XRP
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Frax and XRP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Frax Share and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Frax Share 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 Frax Share 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 Frax Share i.e., Frax Share and XRP go up and down completely randomly.
Pair Corralation between Frax Share and XRP
Assuming the 90 days trading horizon Frax Share is expected to generate 1.91 times less return on investment than XRP. But when comparing it to its historical volatility, Frax Share is 1.28 times less risky than XRP. It trades about 0.21 of its potential returns per unit of risk. XRP is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 56.00 in XRP on September 2, 2024 and sell it today you would earn a total of 139.00 from holding XRP or generate 248.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frax Share vs. XRP
Performance |
| Timeline |
| Frax Share |
| XRP |
Frax Share and XRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frax Share and XRP
The main advantage of trading using opposite Frax Share and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frax Share 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 Frax Share 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |