Asset correlation describes how the price movements of two or more digital assets relate to one another. A positive correlation indicates assets tend to move in the same direction, while a negative correlation shows they move oppositely. Zero correlation suggests independent price action. Understanding this relationship assists investors in evaluating portfolio diversification and overall market exposure within the digital asset sector.
Context
The state of asset correlation within the crypto market is a frequent topic in news reports, particularly during periods of market volatility. Analysts often discuss whether digital assets are becoming more or less correlated with traditional financial markets, which bears significant implications for risk assessment and investment strategies. Changes in correlation can signal shifts in market maturity or investor sentiment.
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