Correlation Between XRP and Solana

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

Diversification Opportunities for XRP and Solana

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between XRP and Solana is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding XRP and Solana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solana 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 Solana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solana has no effect on the direction of XRP i.e., XRP and Solana go up and down completely randomly.

Pair Corralation between XRP and Solana

Assuming the 90 days trading horizon XRP is expected to generate 1.28 times less return on investment than Solana. But when comparing it to its historical volatility, XRP is 1.78 times less risky than Solana. It trades about 0.26 of its potential returns per unit of risk. Solana is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,266  in Solana on May 11, 2022 and sell it today you would earn a total of  741.00  from holding Solana or generate 22.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

XRP  vs.  Solana

 Performance (%) 
       Timeline  
XRP 
XRP Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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

Solana 
Solana Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solana may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Solana Price Channel

XRP and Solana Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with XRP and Solana

The main advantage of trading using opposite XRP and Solana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP position performs unexpectedly, Solana 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 Solana will offset losses from the drop in Solana's long position.
The idea behind XRP and Solana 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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