Correlation Between Cosmos and XRP

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

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

Diversification Opportunities for Cosmos and XRP

0.92

Correlation Coefficient

Cosmos  XRP

Almost no diversification

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

Pair Corralation between Cosmos and XRP

Assuming the 90 days trading horizon Cosmos is expected to generate 1.31 times more return on investment than XRP. However, Cosmos is 1.31 times more volatile than XRP. It trades about 0.05 of its potential returns per unit of risk. XRP is currently generating about -0.01 per unit of risk. If you would invest  700.00  in Cosmos on January 20, 2024 and sell it today you would earn a total of  120.00  from holding Cosmos or generate 17.14% return on investment over 90 days.

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

Cosmos  vs.  XRP

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.

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.

Pair Trading with Cosmos and XRP

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

The idea behind Cosmos and XRP 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 Global Correlations module to find global opportunities by holding instruments from different markets.