Correlation Between XRP and Coinbase Wrapped

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

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

Diversification Opportunities for XRP and Coinbase Wrapped

-0.17

Correlation Coefficient

XRP  Coinbase Wrapped

Good diversification

The 3 months correlation between XRP and Coinbase is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Coinbase Wrapped Staked in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coinbase Wrapped Staked 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 Coinbase Wrapped. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coinbase Wrapped Staked has no effect on the direction of XRP i.e., XRP and Coinbase Wrapped go up and down completely randomly.

Pair Corralation between XRP and Coinbase Wrapped

Assuming the 90 days trading horizon XRP is expected to under-perform the Coinbase Wrapped. In addition to that, XRP is 1.16 times more volatile than Coinbase Wrapped Staked. It trades about -0.24 of its total potential returns per unit of risk. Coinbase Wrapped Staked is currently generating about -0.2 per unit of volatility. If you would invest  334,202  in Coinbase Wrapped Staked on November 27, 2024 and sell it today you would lose (62,801) from holding Coinbase Wrapped Staked or give up 18.79% of portfolio value over 90 days.

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

XRP  vs.  Coinbase Wrapped Staked

XRP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 9 (%) 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.

Coinbase Wrapped Staked

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coinbase Wrapped Staked 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for Coinbase Wrapped Staked shareholders.

Pair Trading with XRP and Coinbase Wrapped

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

The idea behind XRP and Coinbase Wrapped Staked 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..