Correlation Between USDD and XRP

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

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

Diversification Opportunities for USDD and XRP

0.1

Correlation Coefficient

USDD  XRP

Average diversification

The 3 months correlation between USDD and XRP is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding USDD and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and USDD 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 USDD 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 USDD i.e., USDD and XRP go up and down completely randomly.

Pair Corralation between USDD and XRP

Assuming the 90 days trading horizon USDD is expected to generate 129.98 times less return on investment than XRP. But when comparing it to its historical volatility, USDD is 3.36 times less risky than XRP. It trades about 0.01 of its potential returns per unit of risk. XRP is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  222.00  in XRP on April 20, 2025 and sell it today you would earn a total of  120.00  from holding XRP or generate 54.05% return on investment over 90 days.

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

USDD  vs.  XRP

USDD

Risk-Adjusted Performance

Very Weak

Over the last 90 days USDD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, USDD 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 16 (%) 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.

Pair Trading with USDD and XRP

The main advantage of trading using opposite USDD and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USDD 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 USDD 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.