Correlation Between XRP and American International

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

By analyzing existing cross correlation between XRP and American International Group, you can compare the effects of market volatilities on XRP and American International 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 American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and American International.

Diversification Opportunities for XRP and American International

0.53

Correlation Coefficient

XRP  American International

Very weak diversification

The 3 months correlation between XRP and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding XRP and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of XRP i.e., XRP and American International go up and down completely randomly.

Pair Corralation between XRP and American International

Assuming the 90 days trading horizon XRP is expected to generate 7.0 times more return on investment than American International. However, XRP is 7.0 times more volatile than American International Group. It trades about 0.38 of its potential returns per unit of risk. American International Group is currently generating about 0.04 per unit of risk. If you would invest  53.00  in XRP on October 26, 2024 and sell it today you would earn a total of  258.00  from holding XRP or generate 486.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

XRP  vs.  American International Group

XRP

Risk-Adjusted Performance

30 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 30 (%) 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.

American International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, American International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with XRP and American International

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

The idea behind XRP and American International Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.