Correlation Between MDA and XRP

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

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

Diversification Opportunities for MDA and XRP

0.43

Correlation Coefficient

MDA  XRP

Very weak diversification

The 3 months correlation between MDA and XRP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding MDA and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and MDA 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 MDA 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 MDA i.e., MDA and XRP go up and down completely randomly.

Pair Corralation between MDA and XRP

Assuming the 90 days trading horizon MDA is expected to generate 13.83 times more return on investment than XRP. However, MDA is 13.83 times more volatile than XRP. It trades about 0.08 of its potential returns per unit of risk. XRP is currently generating about 0.08 per unit of risk. If you would invest  5.27  in MDA on December 2, 2024 and sell it today you would lose (3.73) from holding MDA or give up 70.78% of portfolio value over 90 days.

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

MDA  vs.  XRP

MDA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MDA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MDA exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 MDA and XRP

The main advantage of trading using opposite MDA and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDA 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 MDA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..