Correlation Between Ocean Protocol and XRP

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

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

Diversification Opportunities for Ocean Protocol and XRP

0.73

Correlation Coefficient

Ocean Protocol  XRP

Poor diversification

The 3 months correlation between Ocean and XRP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Protocol and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Ocean Protocol 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 Ocean Protocol 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 Ocean Protocol i.e., Ocean Protocol and XRP go up and down completely randomly.

Pair Corralation between Ocean Protocol and XRP

Assuming the 90 days trading horizon Ocean Protocol is expected to generate 4.46 times less return on investment than XRP. But when comparing it to its historical volatility, Ocean Protocol is 1.32 times less risky than XRP. It trades about 0.1 of its potential returns per unit of risk. XRP is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  60.00  in XRP on September 13, 2024 and sell it today you would earn a total of  180.00  from holding XRP or generate 300.0% return on investment over 90 days.

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

Ocean Protocol  vs.  XRP

Ocean Protocol

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Protocol are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ocean Protocol exhibited solid returns over the last few months and may actually be approaching a breakup point.

XRP

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XRP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ocean Protocol and XRP

The main advantage of trading using opposite Ocean Protocol and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Protocol 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 Ocean Protocol 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.