Crypto correlation helps investors manage risk by understanding how digital and traditional assets move in relation to each other, enabling smarter portfolio diversification.
Managing risk with cryptocurrency investments is tricky. The market is volatile, making it critical to build a balanced investment portfolio, which reduces exposure to aggressive market fluctuations. You might do this with a varied basket of digital assets alongside traditional equities, bonds and commodities.
Using a crypto correlation enables you to gain a clear understanding of how assets in your portfolio react compared to one another. You can then use this insight to improve your risk management approach to create a balanced and robust portfolio.
Crypto correlation is a mathematical calculation showing the relationship in market price movements between cryptocurrency and traditional finance assets. The technical term for the measurement is called the correlation coefficient, and it can range on a scale of +1.0 to -1.0. This means the crypto correction can either be a positive correlation, a negative correlation or no correlation.
