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
Very weak diversification
The 3 months correlation between MDA and XRP is 0.49. 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 33.19 times more return on investment than XRP. However, MDA is 33.19 times more volatile than XRP. It trades about 0.16 of its potential returns per unit of risk. XRP is currently generating about 0.05 per unit of risk. If you would invest 0.95 in MDA on December 27, 2024 and sell it today you would lose (0.82) from holding MDA or give up 86.25% 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
Performance |
Timeline |
MDA |
XRP |
MDA and XRP Volatility Contrast
Predicted Return Density |
Returns |
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.Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |