Correlation Between Polygon and XRP

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Can any of the company-specific risk be diversified away by investing in both Polygon 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 Polygon and XRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polygon and XRP, you can compare the effects of market volatilities on Polygon 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 Polygon with a short position of XRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polygon and XRP.

Diversification Opportunities for Polygon and XRP

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Polygon and XRP is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and XRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XRP and Polygon 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 Polygon 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 Polygon i.e., Polygon and XRP go up and down completely randomly.

Pair Corralation between Polygon and XRP

Assuming the 90 days trading horizon Polygon is expected to under-perform the XRP. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polygon is 1.61 times less risky than XRP. The crypto coin trades about -0.1 of its potential returns per unit of risk. The XRP is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  33.00  in XRP on July 3, 2022 and sell it today you would earn a total of  14.00  from holding XRP or generate 42.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Polygon  vs.  XRP

 Performance (%) 
       Timeline  
Polygon 
Polygon Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Polygon sustained solid returns over the last few months and may actually be approaching a breakup point.

Polygon Price Channel

XRP 
XRP Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XRP sustained solid returns over the last few months and may actually be approaching a breakup point.

XRP Price Channel

Polygon and XRP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polygon and XRP

The main advantage of trading using opposite Polygon and XRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polygon 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.
Polygon vs. XRP
Polygon vs. Solana
Polygon vs. Polkadot
Polygon vs. Chainlink
The idea behind Polygon 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.
XRP vs. Solana
XRP vs. Polkadot
XRP vs. Chainlink
XRP vs. Polygon
Check out your portfolio center. 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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