Correlation Between XRP and Volatility Shares

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

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

Diversification Opportunities for XRP and Volatility Shares

-0.55

Correlation Coefficient

XRP  Volatility Shares

Excellent diversification

The 3 months correlation between XRP and Volatility is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Volatility Shares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volatility Shares Trust 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 Volatility Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volatility Shares Trust has no effect on the direction of XRP i.e., XRP and Volatility Shares go up and down completely randomly.

Pair Corralation between XRP and Volatility Shares

Assuming the 90 days trading horizon XRP is expected to generate 3.01 times more return on investment than Volatility Shares. However, XRP is 3.01 times more volatile than Volatility Shares Trust. It trades about 0.4 of its potential returns per unit of risk. Volatility Shares Trust is currently generating about 0.06 per unit of risk. If you would invest  50.00  in XRP on October 24, 2024 and sell it today you would earn a total of  268.00  from holding XRP or generate 536.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.79%
Values	Daily Returns

XRP  vs.  Volatility Shares Trust

XRP

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 31 (%) 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.

Volatility Shares Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Volatility Shares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with XRP and Volatility Shares

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

The idea behind XRP and Volatility Shares Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.