Correlation Between XRP and BridgeBio Pharma

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

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

Diversification Opportunities for XRP and BridgeBio Pharma

0.77

Correlation Coefficient

XRP  BridgeBio Pharma

Poor diversification

The 3 months correlation between XRP and BridgeBio is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding XRP and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma 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 BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of XRP i.e., XRP and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between XRP and BridgeBio Pharma

Assuming the 90 days trading horizon XRP is expected to generate 1.34 times more return on investment than BridgeBio Pharma. However, XRP is 1.34 times more volatile than BridgeBio Pharma. It trades about 0.29 of its potential returns per unit of risk. BridgeBio Pharma is currently generating about 0.31 per unit of risk. If you would invest  230.00  in XRP on October 25, 2024 and sell it today you would earn a total of  87.00  from holding XRP or generate 37.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

XRP  vs.  BridgeBio Pharma

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.

BridgeBio Pharma

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XRP and BridgeBio Pharma

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

The idea behind XRP and BridgeBio Pharma 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.