๐ฐ๐ How Do The Cryptocurrencies In Your Portfolio Correlate? A Handy Tool For Valuable Insights ๐๐ฐ
โWow, this is AWESOME!โ
That was my first thought when I discovered this cryptocurrencies correlation matrix:
As someone who bets on a growing cryptocurrency market with a diversified cryptocurrency portfolio using a 70/30 long-term/short-term approach, knowing how investments correlate is very valuable information.
The website Sifrdata.com provides this kind of information. The correction matrix above shows how the 12 cryptocurrencies displayed correlated with each other in the last 90 days. All correlate positively which means on average they move in the same direction. So take for instance BTC and XMR, which have a correlation of 0.71. This means that on average when Bitcoin increased by 1%, Monero increased by 0.71%.
In general the numbers can be interpreted as follows:
To protect your investments from heavy volatility, you want to have a healthy mix with cryptocurrencies that have some (strong) positive relationships, but definitely also some that have (strong) negative relationships. Therefore, one might argue that when you have Bitcoin and Ethereum, it might be a good idea to also have Ripple because of the relative low correlation.
Definitely check out Sifrdata.com and play around with all the options. Make sure to check out the rolling correlation as well! It gives beautiful and insightful graphs like this:
Or check out volatility of the cryptocurrencies (handy S&P 500 volatility included for comparison purposes):
Tell me, what other tools and websites do you use to analyse and optimize your portfolio? Leave a comment below :-)
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Disclaimer: I am not a financial advisor, trader or developer. I am just a crypto/blockchain enthusiast. Please do your own research, draw your own conclusions and do not invest any money that you cannot afford to lose.
The correlations are interesting. I posted on a similar point a few weeks back. Although I calculated them myself so nice to see that there's a website that does the heavy lifting! I think that everything was highly correlated running through the BTC hardfork up to August 1. Kind of a herd mentality with the big fall and rebound. I think that they will start to diverge again now. Take on their own personalities a little more. 90 days is probably too long to see that effect coming through yet.
Indeed, that is what I thought, very handy! I think you are right about the 1st of August and its effect on the correlation. Curious what the numbers look like in 30 days ;-)
Very cool new tool to play. Thanks for the share!
Glad I can be of help @jordanlindsey! I hope to inspire people to think more long term about their investments in crypto :-)
Interesting stuff you're posting as well btw!
Very helpful information for those who are investing in crypto's! Thanks a lot!
Btw followed, upvoted and resteemed
Thanks! I hope more and more people will approach it with a bit more of a long-term focus :-)
Following!
Thanks for this mate.
I will take a deeper look at this tool tomorrow.
This post has received a 1.56 % upvote from @drotto thanks to: @banjo.