Correlation Between XRP and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both XRP and WisdomTree Europe 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 WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and WisdomTree Europe Hedged, you can compare the effects of market volatilities on XRP and WisdomTree Europe 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 WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and WisdomTree Europe.
Diversification Opportunities for XRP and WisdomTree Europe
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between XRP and WisdomTree is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding XRP and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged 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 WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of XRP i.e., XRP and WisdomTree Europe go up and down completely randomly.
Pair Corralation between XRP and WisdomTree Europe
Assuming the 90 days trading horizon XRP is expected to generate 8.03 times more return on investment than WisdomTree Europe. However, XRP is 8.03 times more volatile than WisdomTree Europe Hedged. It trades about 0.27 of its potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.09 per unit of risk. If you would invest 56.00 in XRP on November 2, 2024 and sell it today you would earn a total of 257.00 from holding XRP or generate 458.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.26% |
| Values | Daily Returns |
XRP vs. WisdomTree Europe Hedged
Performance |
| Timeline |
| XRP |
| WisdomTree Europe Hedged |
XRP and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XRP and WisdomTree Europe
The main advantage of trading using opposite XRP and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, WisdomTree Europe 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 WisdomTree Europe will offset losses from the drop in WisdomTree Europe's long position.The idea behind XRP and WisdomTree Europe Hedged 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.| WisdomTree Europe vs. WisdomTree Japan Hedged | WisdomTree Europe vs. WisdomTree Europe SmallCap | WisdomTree Europe vs. Xtrackers MSCI EAFE | WisdomTree Europe vs. SPDR EURO STOXX |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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