Correlation Between XRP and Ethereum PoW

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

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

Diversification Opportunities for XRP and Ethereum PoW

0.48

Correlation Coefficient

XRP  Ethereum PoW

Very weak diversification

The 3 months correlation between XRP and Ethereum is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Ethereum PoW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum PoW 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 Ethereum PoW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum PoW has no effect on the direction of XRP i.e., XRP and Ethereum PoW go up and down completely randomly.

Pair Corralation between XRP and Ethereum PoW

Assuming the 90 days trading horizon XRP is expected to generate 0.51 times more return on investment than Ethereum PoW. However, XRP is 1.97 times less risky than Ethereum PoW. It trades about 0.21 of its potential returns per unit of risk. Ethereum PoW is currently generating about 0.1 per unit of risk. If you would invest  221.00  in XRP on April 23, 2025 and sell it today you would earn a total of  122.00  from holding XRP or generate 55.2% return on investment over 90 days.

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

XRP  vs.  Ethereum PoW

XRP

Risk-Adjusted Performance

Solid

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.

Ethereum PoW

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum PoW are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ethereum PoW exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XRP and Ethereum PoW

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

The idea behind XRP and Ethereum PoW 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.