Correlation Between XRP and Evolution Petroleum

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

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

Diversification Opportunities for XRP and Evolution Petroleum

0.65

Correlation Coefficient

XRP  Evolution Petroleum

Poor diversification

The 3 months correlation between XRP and Evolution is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum 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 Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of XRP i.e., XRP and Evolution Petroleum go up and down completely randomly.

Pair Corralation between XRP and Evolution Petroleum

Assuming the 90 days trading horizon XRP is expected to generate 3.01 times more return on investment than Evolution Petroleum. However, XRP is 3.01 times more volatile than Evolution Petroleum. It trades about 0.05 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.03 per unit of risk. If you would invest  232.00  in XRP on December 21, 2024 and sell it today you would earn a total of  22.00  from holding XRP or generate 9.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

XRP  vs.  Evolution Petroleum

XRP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 4 (%) 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.

Evolution Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Evolution Petroleum is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XRP and Evolution Petroleum

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

The idea behind XRP and Evolution Petroleum 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.