How does the correlation between coherent stock and cryptocurrencies affect portfolio diversification?

1 answers

• Jan 08, 2022 · 3 years ago
  At BYDFi, we believe that the correlation between coherent stock and cryptocurrencies can have a significant impact on portfolio diversification. When the correlation is high, it means that the prices of stocks and cryptocurrencies tend to move in the same direction. This can limit the benefits of diversification as the portfolio becomes more vulnerable to market fluctuations. On the other hand, when the correlation is low or negative, it means that the prices of stocks and cryptocurrencies move in opposite directions, which can enhance the benefits of diversification. By carefully analyzing the correlation and diversifying across different asset classes, investors can potentially reduce the overall risk and increase the potential for higher returns in their portfolios.
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