Correlation Between XRP and WAN

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

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

Diversification Opportunities for XRP and WAN

0.84

Correlation Coefficient

XRP  WAN

Very poor diversification

The 3 months correlation between XRP and WAN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding XRP and WAN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WAN 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 WAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WAN has no effect on the direction of XRP i.e., XRP and WAN go up and down completely randomly.

Pair Corralation between XRP and WAN

Assuming the 90 days trading horizon XRP is expected to generate 1.41 times more return on investment than WAN. However, XRP is 1.41 times more volatile than WAN. It trades about 0.31 of its potential returns per unit of risk. WAN is currently generating about 0.14 per unit of risk. If you would invest  56.00  in XRP on September 1, 2024 and sell it today you would earn a total of  124.00  from holding XRP or generate 221.43% return on investment over 90 days.

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

XRP  vs.  WAN

XRP

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XRP exhibited solid returns over the last few months and may actually be approaching a breakup point.

WAN

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WAN are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, WAN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XRP and WAN

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

The idea behind XRP and WAN 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.