Correlation Between XRP and North American
Can any of the company-specific risk be diversified away by investing in both XRP and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and The North American, you can compare the effects of market volatilities on XRP and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and North American.
Diversification Opportunities for XRP and North American
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between XRP and North is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding XRP and The North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American has no effect on the direction of XRP i.e., XRP and North American go up and down completely randomly.
Pair Corralation between XRP and North American
Assuming the 90 days trading horizon XRP is expected to generate 4.46 times more return on investment than North American. However, XRP is 4.46 times more volatile than The North American. It trades about 0.04 of its potential returns per unit of risk. The North American is currently generating about -0.01 per unit of risk. If you would invest 237.00 in XRP on October 9, 2024 and sell it today you would earn a total of 5.00 from holding XRP or generate 2.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
XRP vs. The North American
Performance |
| Timeline |
| XRP |
| North American |
XRP and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XRP and North American
The main advantage of trading using opposite XRP and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.The idea behind XRP and The North American 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.| North American vs. SupplyMe Capital PLC | North American vs. SM Energy Co | North American vs. FuelCell Energy | North American vs. Grand Vision Media |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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