correlation matrix
What is it?
A tool that shows you the correlation between 2 assets within a selected time period. Positively correlated assets tend to move together in the same direction. Negatively correlated assets tend to move in opposite direction. Uncorrelated assets (close to 0) move independently of each other.
Our Multi-asset Correlation Matrix contains the top blockchains (L1s), precious metals (gold, silver), and stocks (S&P 500, Nasdaq).
Why does it matter?
When you consider your complete portfolio of assets, including asset classes outside of crypto, you want to consider the correlation between assets if your goal is to diversify. When you own multiple assets in your portfolio, but those assets are highly correlated, your portfolio isn’t really diversified and generally has a higher risk.
As the long-term correlation between crypto assets and other assets classes like stocks (e.g. S&P 500) or gold (GLD) is fairly low (see the matrix), a smart modern portfolio manager has at least some crypto in their portfolio.
But also when it comes to your crypto-only portfolio, it is good to be aware of how correlated some alt coins are to each other so you can optimize your portfolio for diversification if that is what you aim for.
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