Correlation Between XRP and ARPA

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

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

Diversification Opportunities for XRP and ARPA

0.31

Correlation Coefficient

XRP  ARPA

Weak diversification

The 3 months correlation between XRP and ARPA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding XRP and ARPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA 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 ARPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARPA has no effect on the direction of XRP i.e., XRP and ARPA go up and down completely randomly.

Pair Corralation between XRP and ARPA

Assuming the 90 days trading horizon XRP is expected to generate 0.9 times more return on investment than ARPA. However, XRP is 1.11 times less risky than ARPA. It trades about 0.04 of its potential returns per unit of risk. ARPA is currently generating about -0.1 per unit of risk. If you would invest  208.00  in XRP on December 28, 2024 and sell it today you would earn a total of  13.00  from holding XRP or generate 6.25% return on investment over 90 days.

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

XRP  vs.  ARPA

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.

ARPA

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARPA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for ARPA shareholders.

Pair Trading with XRP and ARPA

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

The idea behind XRP and ARPA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.