Correlation Between XRP and True USD

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

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

Diversification Opportunities for XRP and True USD

0.14

Correlation Coefficient

XRP  True USD

Average diversification

The 3 months correlation between XRP and True is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding XRP and True USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True USD 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 True USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True USD has no effect on the direction of XRP i.e., XRP and True USD go up and down completely randomly.

Pair Corralation between XRP and True USD

Assuming the 90 days trading horizon XRP is expected to under-perform the True USD. In addition to that, XRP is 28.61 times more volatile than True USD. It trades about -0.01 of its total potential returns per unit of risk. True USD is currently generating about 0.0 per unit of volatility. If you would invest  100.00  in True USD on January 7, 2025 and sell it today you would earn a total of  0.00  from holding True USD or generate 0.0% return on investment over 90 days.

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

XRP  vs.  True USD

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.

True USD

Risk-Adjusted Performance

Very Weak

Over the last 90 days True USD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, True USD 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 True USD

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

The idea behind XRP and True USD 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.