Correlation Between XRP and Invesco Small

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

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

Diversification Opportunities for XRP and Invesco Small

-0.05

Correlation Coefficient

XRP  Invesco Small

Good diversification

The 3 months correlation between XRP and Invesco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap 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 Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of XRP i.e., XRP and Invesco Small go up and down completely randomly.

Pair Corralation between XRP and Invesco Small

Assuming the 90 days trading horizon XRP is expected to generate 4.94 times more return on investment than Invesco Small. However, XRP is 4.94 times more volatile than Invesco Small Cap. It trades about 0.34 of its potential returns per unit of risk. Invesco Small Cap is currently generating about 0.21 per unit of risk. If you would invest  214.00  in XRP on October 27, 2024 and sell it today you would earn a total of  97.00  from holding XRP or generate 45.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

XRP  vs.  Invesco Small Cap

XRP

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 29 (%) 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.

Invesco Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Small 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 Invesco Small

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

The idea behind XRP and Invesco Small Cap 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.