Correlation Between FileCoin and XRP

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

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

Diversification Opportunities for FileCoin and XRP

0.91

Correlation Coefficient

FileCoin  XRP

Almost no diversification

The 3 months correlation between FileCoin and XRP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding FileCoin and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and FileCoin 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 FileCoin are associated (or correlated) with XRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XRP has no effect on the direction of FileCoin i.e., FileCoin and XRP go up and down completely randomly.

Pair Corralation between FileCoin and XRP

Assuming the 90 days trading horizon FileCoin is expected to under-perform the XRP. In addition to that, FileCoin is 1.32 times more volatile than XRP. It trades about -0.29 of its total potential returns per unit of risk. XRP is currently generating about -0.11 per unit of volatility. If you would invest  63.00  in XRP on January 25, 2024 and sell it today you would lose (8.00) from holding XRP or give up 12.7% of portfolio value over 90 days.

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

FileCoin  vs.  XRP

FileCoin

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FileCoin are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, FileCoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

XRP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XRP may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with FileCoin and XRP

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

The idea behind FileCoin and XRP 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..