Correlation Between Cronos and XRP

Can any of the company-specific risk be diversified away by investing in both Cronos 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 Cronos and XRP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cronos and XRP, you can compare the effects of market volatilities on Cronos 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 Cronos with a short position of XRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and XRP.

Diversification Opportunities for Cronos and XRP

0.07

Correlation Coefficient

Cronos  XRP

Significant diversification

The 3 months correlation between Cronos and XRP is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Cronos 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 Cronos 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 Cronos i.e., Cronos and XRP go up and down completely randomly.

Pair Corralation between Cronos and XRP

Assuming the 90 days trading horizon Cronos is expected to under-perform the XRP. In addition to that, Cronos is 1.33 times more volatile than XRP. It trades about -0.02 of its total potential returns per unit of risk. XRP is currently generating about -0.02 per unit of volatility. If you would invest  253.00  in XRP on February 3, 2025 and sell it today you would lose (34.00) from holding XRP or give up 13.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cronos  vs.  XRP

Cronos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cronos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Cronos shareholders.

XRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days XRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, XRP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cronos and XRP

The main advantage of trading using opposite Cronos and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cronos 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.

The idea behind Cronos and XRP 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.