Correlation Between XRP and Cosmos

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

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

Diversification Opportunities for XRP and Cosmos

0.92

Correlation Coefficient

XRP  Cosmos

Almost no diversification

The 3 months correlation between XRP and Cosmos is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Cosmos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos 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 Cosmos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmos has no effect on the direction of XRP i.e., XRP and Cosmos go up and down completely randomly.

Pair Corralation between XRP and Cosmos

Assuming the 90 days trading horizon XRP is expected to generate 0.83 times more return on investment than Cosmos. However, XRP is 1.2 times less risky than Cosmos. It trades about -0.24 of its potential returns per unit of risk. Cosmos is currently generating about -0.28 per unit of risk. If you would invest  64.00  in XRP on January 20, 2024 and sell it today you would lose (14.00) from holding XRP or give up 21.87% of portfolio value over 90 days.

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

XRP  vs.  Cosmos

XRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, XRP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cosmos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cosmos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with XRP and Cosmos

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

The idea behind XRP and Cosmos 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.