Correlation Between XRP and Solana

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Can any of the company-specific risk be diversified away by investing in both XRP and Solana 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 Solana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XRP and Solana, you can compare the effects of market volatilities on XRP and Solana 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 Solana. Check out your portfolio center. Please also check ongoing floating volatility patterns of XRP and Solana.

Diversification Opportunities for XRP and Solana

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between XRP and Solana is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Solana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solana 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 Solana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solana has no effect on the direction of XRP i.e., XRP and Solana go up and down completely randomly.

Pair Corralation between XRP and Solana

Assuming the 90 days trading horizon XRP is expected to generate 0.87 times more return on investment than Solana. However, XRP is 1.15 times less risky than Solana. It trades about 0.27 of its potential returns per unit of risk. Solana is currently generating about 0.12 per unit of risk. If you would invest  51.00  in XRP on November 30, 2023 and sell it today you would earn a total of  8.00  from holding XRP or generate 15.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

XRP  vs.  Solana

 Performance 
       Timeline  
XRP 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.
Solana 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Solana exhibited solid returns over the last few months and may actually be approaching a breakup point.

XRP and Solana Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with XRP and Solana

The main advantage of trading using opposite XRP and Solana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Solana 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 Solana will offset losses from the drop in Solana's long position.
The idea behind XRP and Solana 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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