Correlation Between XRP and Small Cap

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

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

Diversification Opportunities for XRP and Small Cap

0.09

Correlation Coefficient

XRP  Small Cap

Significant diversification

The 3 months correlation between XRP and Small is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of XRP i.e., XRP and Small Cap go up and down completely randomly.

Pair Corralation between XRP and Small Cap

Assuming the 90 days trading horizon XRP is expected to generate 5.66 times more return on investment than Small Cap. However, XRP is 5.66 times more volatile than Small Cap Growth. It trades about 0.12 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.05 per unit of risk. If you would invest  40.00  in XRP on October 11, 2024 and sell it today you would earn a total of  198.00  from holding XRP or generate 495.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.0%
Values	Daily Returns

XRP  vs.  Small Cap Growth

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.

Small Cap Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with XRP and Small Cap

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

The idea behind XRP and Small Cap Growth 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.