diversifiable risk of combining XRP and Illuvium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and Illuvium, you can compare the effects of market volatilities on XRP and Illuvium 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 Illuvium. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and Illuvium.
Diversification Opportunities for XRP and Illuvium
Pair Corralation between XRP and Illuvium
Assuming the 90 days trading horizon XRP is expected to generate 3.07 times less return on investment than Illuvium. But when comparing it to its historical volatility, XRP is 2.9 times less risky than Illuvium. It trades about 0.27 of its potential returns per unit of risk. Illuvium is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 7,724 in Illuvium on November 30, 2023 and sell it today you would earn a total of 4,187 from holding Illuvium or generate 54.21% return on investment over 90 days.
XRP vs. Illuvium
Pair Trading with XRP and IlluviumThe main advantage of trading using opposite XRP and Illuvium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Illuvium 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 Illuvium will offset losses from the drop in Illuvium's long position. The idea behind XRP and Illuvium 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 the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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