Correlation Between NAS and XRP
Can any of the company-specific risk be diversified away by investing in both NAS 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 NAS and XRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NAS and XRP, you can compare the effects of market volatilities on NAS 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 NAS with a short position of XRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAS and XRP.
Diversification Opportunities for NAS and XRP
Good diversification
The 3 months correlation between NAS and XRP is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding NAS and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and NAS 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 NAS 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 NAS i.e., NAS and XRP go up and down completely randomly.
Pair Corralation between NAS and XRP
Assuming the 90 days trading horizon NAS is expected to under-perform the XRP. In addition to that, NAS is 1.3 times more volatile than XRP. It trades about -0.03 of its total potential returns per unit of risk. XRP is currently generating about 0.11 per unit of volatility. If you would invest 40.00 in XRP on September 2, 2024 and sell it today you would earn a total of 155.00 from holding XRP or generate 387.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NAS vs. XRP
Performance |
| Timeline |
| NAS |
| XRP |
NAS and XRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NAS and XRP
The main advantage of trading using opposite NAS and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAS 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 NAS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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