Your crypto portfolio diversified? Weekly CryptoCorrelation Update (week ending Mar 23)

infinitesimal (39)in #bitcoin • 7 years ago (edited)

Hey traders and/or investors alike!

Have you ever wonder if adding another new crypto to your crypto-portfolio actually adds or reduces risk?

Do you remember last time when all your cryptos crashed together and you were in pain?

Is your crypto-portfolio diversified?

Here might be something that could help you manage risk and avoid concentrated positions. If you cannot stomach the pain of huge swing in your crypto-portfolio, you may want to consider owning some coins that are less correlated with the other big positions you own.

If you have studied statistics in school you might have heard about correlations.

No worries if you don't recall correlations. Here's in layman terms what correlation represents:

Correlation describe the relationship between two variables/assets
Correlation ranges from -1 to +1
Closer correlation to +1 means the two assets have position correlation so and up move by one asset is likely matched by an up move by the other asset, and vice versa for down move
Closer correlation to -1 means the two assets have inverse correlation so and up move by one asset is likely matched by a down move by the other asset, and vice versa
Correlation of 0 means that's no statistical evidence that a correlation exists

Let take a look at the top 5 noteworthy cryptos for this week as these seem to have some interesting correlations with most major cryptos:

This week - Top 5 Noteworthy Cryptos in a matrix (with low correlations!)

Here is the top 25 major cryptos' correlations against Bitcoin (a.k.a the mothership of all things cryptos).

Note that EOS, NEM, Ethereum Classic, Nano and ICON are showing some interestingly low correlations with Bitcoin so statistically these are your latest diversification candidates.