Correlation Between LRN and XRP

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

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

Diversification Opportunities for LRN and XRP

0.71

Correlation Coefficient

LRN  XRP

Poor diversification

The 3 months correlation between LRN and XRP is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LRN and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and LRN 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 LRN 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 LRN i.e., LRN and XRP go up and down completely randomly.

Pair Corralation between LRN and XRP

Assuming the 90 days trading horizon LRN is expected to generate 12.59 times less return on investment than XRP. In addition to that, LRN is 1.62 times more volatile than XRP. It trades about 0.0 of its total potential returns per unit of risk. XRP is currently generating about 0.08 per unit of volatility. If you would invest  37.00  in XRP on December 2, 2024 and sell it today you would earn a total of  182.00  from holding XRP or generate 491.89% return on investment over 90 days.

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

LRN  vs.  XRP

LRN

Risk-Adjusted Performance

Very Weak

Over the last 90 days LRN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 LRN 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 LRN and XRP

The main advantage of trading using opposite LRN and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LRN 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 LRN 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.