Correlation Between Solana and XRP

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

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

Diversification Opportunities for Solana and XRP

0.85
  Correlation Coefficient
Solana
XRP

Very poor diversification

The 1 month correlation between Solana and XRP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Solana and XRP in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on XRP and Solana 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 Solana 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 Solana i.e., Solana and XRP go up and down completely randomly.

Pair Corralation between Solana and XRP

Assuming the 90 days trading horizon Solana is expected to generate 1.25 times more return on investment than XRP. However, Solana is 1.25 times more volatile than XRP. It trades about -0.04 of its potential returns per unit of risk. XRP is currently generating about -0.09 per unit of risk. If you would invest  19,025  in Solana on October 19, 2021 and sell it today you would lose (4,251)  from holding Solana or give up 22.34% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Solana  vs.  XRP

 Performance (%) 
      Timeline 
Solana 
Solana Performance
0 of 100
Over the last 90 days Solana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in February 2022. The current disturbance may also be a sign of long term up-swing for Solana investors.

Solana Price Channel

XRP 
XRP Performance
0 of 100
Over the last 90 days XRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in February 2022. The current disturbance may also be a sign of long term up-swing for XRP investors.

XRP Price Channel

Solana and XRP Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Solana and XRP

The main advantage of trading using opposite Solana and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana 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 Solana 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.
Check out your portfolio center. 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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