Correlation Between Bitcoin Cash and XRP
Can any of the company-specific risk be diversified away by investing in both Bitcoin Cash and XRP 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 Bitcoin Cash and XRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin Cash and XRP, you can compare the effects of market volatilities on Bitcoin Cash and XRP 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 Bitcoin Cash with a short position of XRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin Cash and XRP.
Diversification Opportunities for Bitcoin Cash and XRP
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bitcoin and XRP is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Bitcoin Cash 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 Bitcoin Cash are associated (or correlated) with XRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XRP has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and XRP go up and down completely randomly.
Pair Corralation between Bitcoin Cash and XRP
Assuming the 90 days trading horizon Bitcoin Cash is expected to generate 1.11 times more return on investment than XRP. However, Bitcoin Cash is 1.11 times more volatile than XRP. It trades about 0.11 of its potential returns per unit of risk. XRP is currently generating about 0.03 per unit of risk. If you would invest 11,765 in Bitcoin Cash on January 20, 2024 and sell it today you would earn a total of 36,777 from holding Bitcoin Cash or generate 312.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Bitcoin Cash vs. XRP
Performance |
Timeline |
Bitcoin Cash |
XRP |
Bitcoin Cash and XRP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bitcoin Cash and XRP
The main advantage of trading using opposite Bitcoin Cash and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin Cash position performs unexpectedly, XRP 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 XRP will offset losses from the drop in XRP's long position.Bitcoin Cash vs. Bitcoin | Bitcoin Cash vs. Dogecoin | Bitcoin Cash vs. Litecoin | Bitcoin Cash vs. Ethereum Classic |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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