Correlation Between XRP and First Trust
Can any of the company-specific risk be diversified away by investing in both XRP and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and First Trust Low, you can compare the effects of market volatilities on XRP and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and First Trust.
Diversification Opportunities for XRP and First Trust
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between XRP and First is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding XRP and First Trust Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Low 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Low has no effect on the direction of XRP i.e., XRP and First Trust go up and down completely randomly.
Pair Corralation between XRP and First Trust
Assuming the 90 days trading horizon XRP is expected to generate 36.07 times more return on investment than First Trust. However, XRP is 36.07 times more volatile than First Trust Low. It trades about 0.32 of its potential returns per unit of risk. First Trust Low is currently generating about 0.11 per unit of risk. If you would invest 228.00 in XRP on October 20, 2024 and sell it today you would earn a total of 101.00 from holding XRP or generate 44.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
XRP vs. First Trust Low
Performance |
| Timeline |
| XRP |
| First Trust Low |
XRP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XRP and First Trust
The main advantage of trading using opposite XRP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind XRP and First Trust Low 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.| First Trust vs. First Trust Emerging | First Trust vs. First Trust Low | First Trust vs. First Trust TCW | First Trust vs. First Trust SSI |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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