Correlation Between Bitcoin SV and XRP

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

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

Diversification Opportunities for Bitcoin SV and XRP

0.85

Correlation Coefficient

Bitcoin SV  XRP

Very poor diversification

The 3 months correlation between Bitcoin and XRP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin SV and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Bitcoin SV 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 Bitcoin SV 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 Bitcoin SV i.e., Bitcoin SV and XRP go up and down completely randomly.

Pair Corralation between Bitcoin SV and XRP

Assuming the 90 days trading horizon Bitcoin SV is expected to generate 1.55 times more return on investment than XRP. However, Bitcoin SV is 1.55 times more volatile than XRP. It trades about -0.11 of its potential returns per unit of risk. XRP is currently generating about -0.18 per unit of risk. If you would invest  8,022  in Bitcoin SV on January 21, 2024 and sell it today you would lose (1,415) from holding Bitcoin SV or give up 17.64% of portfolio value over 90 days.

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

Bitcoin SV  vs.  XRP

Bitcoin SV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin SV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bitcoin SV 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 Bitcoin SV and XRP

The main advantage of trading using opposite Bitcoin SV and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin SV 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 Bitcoin SV 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.