Correlation Between XRP and Franklin LibertyQ

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

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

Diversification Opportunities for XRP and Franklin LibertyQ

0.34

Correlation Coefficient

XRP  Franklin LibertyQ

Weak diversification

The 3 months correlation between XRP and Franklin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Franklin LibertyQ Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Small 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 Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Small has no effect on the direction of XRP i.e., XRP and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between XRP and Franklin LibertyQ

Assuming the 90 days trading horizon XRP is expected to generate 8.78 times more return on investment than Franklin LibertyQ. However, XRP is 8.78 times more volatile than Franklin LibertyQ Small. It trades about 0.37 of its potential returns per unit of risk. Franklin LibertyQ Small is currently generating about -0.21 per unit of risk. If you would invest  71.00  in XRP on October 11, 2024 and sell it today you would earn a total of  167.00  from holding XRP or generate 235.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

XRP  vs.  Franklin LibertyQ Small

XRP

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 25 (%) 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.

Franklin LibertyQ Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin LibertyQ Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin LibertyQ is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with XRP and Franklin LibertyQ

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

The idea behind XRP and Franklin LibertyQ Small 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.