Correlation Between XRP and Automata

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

Diversification Opportunities for XRP and Automata

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between XRP and Automata is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Automata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automata 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 Automata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automata has no effect on the direction of XRP i.e., XRP and Automata go up and down completely randomly.

Pair Corralation between XRP and Automata

Assuming the 90 days trading horizon XRP is expected to under-perform the Automata. But the crypto coin apears to be less risky and, when comparing its historical volatility, XRP is 18.82 times less risky than Automata. The crypto coin trades about -0.07 of its potential returns per unit of risk. The Automata is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Automata on May 18, 2022 and sell it today you would earn a total of  21.00  from holding Automata or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy48.6%
ValuesDaily Returns

XRP  vs.  Automata

 Performance (%) 
       Timeline  
XRP 
XRP Performance
0 of 100
Over the last 90 days XRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, XRP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

XRP Price Channel

Automata 
Automata Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Automata are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automata sustained solid returns over the last few months and may actually be approaching a breakup point.

Automata Price Channel

XRP and Automata Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with XRP and Automata

The main advantage of trading using opposite XRP and Automata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Automata 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 Automata will offset losses from the drop in Automata's long position.
The idea behind XRP and Automata 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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