Bitcoin correlation: which coins go their own way

Most of the crypto market follows bitcoin. Which means ten “different” positions are often one and the same bet: BTC turns and everything falls. Correlation shows where that link is tight and where it barely exists.

How to read the number

• Near +1 — the coin repeats bitcoin almost word for word. There is little point in it separately: the same move is available in BTC itself, with deeper liquidity and a tighter spread.
• 0.5–0.8 — the usual state of large altcoins: same direction, own amplitude.
• Near zero — the coin lives its own life. These matter most when the market stalls: while BTC ranges, they may have a move of their own.
• Below zero — rare and usually brief: more often the result of its own news than a stable property.

Why it belongs to risk, not entries

Correlation matters most not when picking an entry but when counting risk. Five positions correlated at 0.9 are not five one-percent trades — they are a single five-percent trade, and you find that out at the moment the market goes against you.

What it is computed on

We take hourly returns over a day: not prices themselves but their changes. Comparing prices directly would show a false link between any two rising charts; changes capture co-movement rather than a shared trend.

Questions and answers