Correlation Between REM and XRP

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

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

Diversification Opportunities for REM and XRP

-0.05

Correlation Coefficient

REM  XRP

Good diversification

The 3 months correlation between REM and XRP is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding REM and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and REM 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 REM 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 REM i.e., REM and XRP go up and down completely randomly.

Pair Corralation between REM and XRP

Assuming the 90 days trading horizon REM is expected to generate 5.86 times more return on investment than XRP. However, REM is 5.86 times more volatile than XRP. It trades about 0.08 of its potential returns per unit of risk. XRP is currently generating about 0.05 per unit of risk. If you would invest  0.01  in REM on December 27, 2024 and sell it today you would lose (0.01) from holding REM or give up 63.16% of portfolio value over 90 days.

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

REM  vs.  XRP

REM

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REM are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, REM exhibited solid returns over the last few months and may actually be approaching a breakup point.

XRP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 3 (%) 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 REM and XRP

The main advantage of trading using opposite REM and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REM 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 REM 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.