Correlation Between XRP and Velodrome Finance
Can any of the company-specific risk be diversified away by investing in both XRP and Velodrome Finance 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 Velodrome Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and Velodrome Finance, you can compare the effects of market volatilities on XRP and Velodrome Finance 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 Velodrome Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and Velodrome Finance.
Diversification Opportunities for XRP and Velodrome Finance
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between XRP and Velodrome is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Velodrome Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velodrome Finance 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 Velodrome Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velodrome Finance has no effect on the direction of XRP i.e., XRP and Velodrome Finance go up and down completely randomly.
Pair Corralation between XRP and Velodrome Finance
Assuming the 90 days trading horizon XRP is expected to generate 0.99 times more return on investment than Velodrome Finance. However, XRP is 1.01 times less risky than Velodrome Finance. It trades about 0.58 of its potential returns per unit of risk. Velodrome Finance is currently generating about 0.2 per unit of risk. If you would invest 52.00 in XRP on August 30, 2024 and sell it today you would earn a total of 102.00 from holding XRP or generate 196.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
XRP vs. Velodrome Finance
Performance |
| Timeline |
| XRP |
| Velodrome Finance |
XRP and Velodrome Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XRP and Velodrome Finance
The main advantage of trading using opposite XRP and Velodrome Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Velodrome Finance 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 Velodrome Finance will offset losses from the drop in Velodrome Finance's long position.The idea behind XRP and Velodrome Finance 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.| Velodrome Finance vs. XRP | Velodrome Finance vs. Solana | Velodrome Finance vs. Staked Ether | Velodrome Finance vs. Sui |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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