Correlation Between XPLA and Binance Coin

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

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

Diversification Opportunities for XPLA and Binance Coin

-0.07

Correlation Coefficient

XPLA  Binance Coin

Good diversification

The 3 months correlation between XPLA and Binance is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding XPLA and Binance Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binance Coin and XPLA 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 XPLA are associated (or correlated) with Binance Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binance Coin has no effect on the direction of XPLA i.e., XPLA and Binance Coin go up and down completely randomly.

Pair Corralation between XPLA and Binance Coin

Assuming the 90 days trading horizon XPLA is expected to generate 1.36 times less return on investment than Binance Coin. In addition to that, XPLA is 1.35 times more volatile than Binance Coin. It trades about 0.08 of its total potential returns per unit of risk. Binance Coin is currently generating about 0.15 per unit of volatility. If you would invest  51,866  in Binance Coin on September 2, 2024 and sell it today you would earn a total of  13,533  from holding Binance Coin or generate 26.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

XPLA  vs.  Binance Coin

XPLA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XPLA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, XPLA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Binance Coin

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Binance Coin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XPLA and Binance Coin

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

The idea behind XPLA and Binance Coin 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.