Correlation Between XRP and STEPN

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

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

Diversification Opportunities for XRP and STEPN

-0.48

Correlation Coefficient

XRP  STEPN

Very good diversification

The 3 months correlation between XRP and STEPN is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding XRP and STEPN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEPN 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 STEPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEPN has no effect on the direction of XRP i.e., XRP and STEPN go up and down completely randomly.

Pair Corralation between XRP and STEPN

Assuming the 90 days trading horizon XRP is expected to generate 0.74 times more return on investment than STEPN. However, XRP is 1.36 times less risky than STEPN. It trades about 0.12 of its potential returns per unit of risk. STEPN is currently generating about -0.16 per unit of risk. If you would invest  154.00  in XRP on November 27, 2024 and sell it today you would earn a total of  74.00  from holding XRP or generate 48.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

XRP  vs.  STEPN

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.

STEPN

Risk-Adjusted Performance

Very Weak

Over the last 90 days STEPN 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 basic 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 STEPN shareholders.

Pair Trading with XRP and STEPN

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

The idea behind XRP and STEPN 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.