Correlation Between XRP and Strategy Shares

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

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

Diversification Opportunities for XRP and Strategy Shares

-0.14

Correlation Coefficient

XRP  Strategy Shares

Good diversification

The 3 months correlation between XRP and Strategy is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of XRP i.e., XRP and Strategy Shares go up and down completely randomly.

Pair Corralation between XRP and Strategy Shares

Assuming the 90 days trading horizon XRP is expected to generate 68.45 times less return on investment than Strategy Shares. But when comparing it to its historical volatility, XRP is 45.09 times less risky than Strategy Shares. It trades about 0.18 of its potential returns per unit of risk. Strategy Shares is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Strategy Shares on October 9, 2024 and sell it today you would earn a total of  2,445  from holding Strategy Shares or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.48%
Values	Daily Returns

XRP  vs.  Strategy Shares

XRP

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 26 (%) 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.

Strategy Shares

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Strategy Shares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XRP and Strategy Shares

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

The idea behind XRP and Strategy Shares 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.