Correlation Between XRP and Flow

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

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

Diversification Opportunities for XRP and Flow

0.63

Correlation Coefficient

XRP  Flow

Poor diversification

The 3 months correlation between XRP and Flow is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Flow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow 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 Flow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow has no effect on the direction of XRP i.e., XRP and Flow go up and down completely randomly.

Pair Corralation between XRP and Flow

Assuming the 90 days trading horizon XRP is expected to generate 0.84 times more return on investment than Flow. However, XRP is 1.19 times less risky than Flow. It trades about 0.01 of its potential returns per unit of risk. Flow is currently generating about -0.09 per unit of risk. If you would invest  54.00  in XRP on August 4, 2024 and sell it today you would lose (3.00) from holding XRP or give up 5.56% of portfolio value over 90 days.

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

XRP  vs.  Flow

XRP

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Flow

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with XRP and Flow

The main advantage of trading using opposite XRP and Flow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Flow 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 Flow will offset losses from the drop in Flow's long position.

The idea behind XRP and Flow 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.