Correlation Between XRP and Adidas AG

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

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

Diversification Opportunities for XRP and Adidas AG

0.4

Correlation Coefficient

XRP  Adidas AG

Very weak diversification

The 3 months correlation between XRP and Adidas is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding XRP and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and XRP 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 XRP are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of XRP i.e., XRP and Adidas AG go up and down completely randomly.

Pair Corralation between XRP and Adidas AG

Assuming the 90 days trading horizon XRP is expected to generate 3.65 times more return on investment than Adidas AG. However, XRP is 3.65 times more volatile than adidas AG. It trades about 0.27 of its potential returns per unit of risk. adidas AG is currently generating about 0.34 per unit of risk. If you would invest  232.00  in XRP on October 24, 2024 and sell it today you would earn a total of  85.00  from holding XRP or generate 36.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.82%
Values	Daily Returns

XRP  vs.  adidas AG

XRP

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 31 (%) 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.

adidas AG

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with XRP and Adidas AG

The main advantage of trading using opposite XRP and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.

The idea behind XRP and adidas AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.