Correlation Between XRP and Flare
Can any of the company-specific risk be diversified away by investing in both XRP and Flare 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 XRP and Flare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and Flare, you can compare the effects of market volatilities on XRP and Flare 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 XRP with a short position of Flare. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and Flare.
Diversification Opportunities for XRP and Flare
Almost no diversification
The 3 months correlation between XRP and Flare is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Flare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flare and XRP 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 XRP are associated (or correlated) with Flare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flare has no effect on the direction of XRP i.e., XRP and Flare go up and down completely randomly.
Pair Corralation between XRP and Flare
Assuming the 90 days trading horizon XRP is expected to generate 1.04 times more return on investment than Flare. However, XRP is 1.04 times more volatile than Flare. It trades about 0.17 of its potential returns per unit of risk. Flare is currently generating about -0.01 per unit of risk. If you would invest 54.00 in XRP on August 26, 2024 and sell it today you would earn a total of 96.00 from holding XRP or generate 177.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
XRP vs. Flare
Performance |
| Timeline |
| XRP |
| Flare |
XRP and Flare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XRP and Flare
The main advantage of trading using opposite XRP and Flare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Flare 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 Flare will offset losses from the drop in Flare's long position.The idea behind XRP and Flare 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |