Correlation Between XRP and SSgA SPDR

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

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

Diversification Opportunities for XRP and SSgA SPDR

0.74

Correlation Coefficient

XRP  SSgA SPDR

Poor diversification

The 3 months correlation between XRP and SSgA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding XRP and SSgA SPDR SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR SP 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR SP has no effect on the direction of XRP i.e., XRP and SSgA SPDR go up and down completely randomly.

Pair Corralation between XRP and SSgA SPDR

Assuming the 90 days trading horizon XRP is expected to generate 8.97 times more return on investment than SSgA SPDR. However, XRP is 8.97 times more volatile than SSgA SPDR SP. It trades about 0.37 of its potential returns per unit of risk. SSgA SPDR SP is currently generating about -0.06 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	Significant
Accuracy	95.35%
Values	Daily Returns

XRP  vs.  SSgA SPDR SP

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.

SSgA SPDR SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SSgA SPDR 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 SSgA SPDR

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

The idea behind XRP and SSgA SPDR SP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.