Definition ∞ Market correlation measures the statistical relationship between the price movements of two or more assets or markets. A high positive correlation indicates that assets tend to move in the same direction, while a negative correlation suggests opposite movements. Zero correlation implies no consistent relationship. Investors use this metric to assess diversification benefits within a portfolio.
Context ∞ The market correlation between digital assets and traditional financial markets is a frequent subject in crypto news and analysis. Historically, cryptocurrencies like Bitcoin were considered uncorrelated, offering diversification benefits. However, recent periods have shown increasing correlation with equities, particularly during macroeconomic shifts. Discussions often center on whether digital assets are maturing into a more integrated asset class or if they retain their unique independent price drivers. Understanding these relationships is critical for risk management.
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