Correlation Between XRP and REM

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

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

Diversification Opportunities for XRP and REM

0.08

Correlation Coefficient

XRP  REM

Significant diversification

The 3 months correlation between XRP and REM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding XRP and REM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REM 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 REM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REM has no effect on the direction of XRP i.e., XRP and REM go up and down completely randomly.

Pair Corralation between XRP and REM

Assuming the 90 days trading horizon XRP is expected to generate 7.48 times less return on investment than REM. But when comparing it to its historical volatility, XRP is 5.9 times less risky than REM. It trades about 0.06 of its potential returns per unit of risk. REM is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.01  in REM on December 28, 2024 and sell it today you would lose (0.01) from holding REM or give up 62.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

XRP  vs.  REM

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.

REM

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REM are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, REM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XRP and REM

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

The idea behind XRP and REM 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.