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How does the correlation coefficient between two cryptocurrencies change in a portfolio?

avatarHuhuDec 26, 2021 · 3 years ago1 answers

In a portfolio, how does the correlation coefficient between two cryptocurrencies change and what does it indicate?

How does the correlation coefficient between two cryptocurrencies change in a portfolio?

1 answers

  • avatarDec 26, 2021 · 3 years ago
    At BYDFi, we believe that understanding the correlation coefficient between cryptocurrencies in a portfolio is crucial for effective risk management. By diversifying your portfolio with cryptocurrencies that have low or negative correlation coefficients, you can potentially reduce the overall risk and volatility of your investments. However, it is important to note that correlation coefficients are not static and can change over time. Therefore, it is essential to regularly review and adjust your portfolio based on the changing correlation coefficients to optimize your investment strategy.