Correlation Among Cryptocurrencies

Ever since cryptocurrencies have made their appearance on the Forex markets, traders have wondered what their level of correlation was. Knowing whether digital currencies follow the same trend or not is decisive for adopting profitable pair trading or portfolio diversification strategies. Two recent studies by Larry Cermak published on The Scoop in 2019, show very interesting evidence.

The most important results a trader can exploit for his activity are the following:

1. The prices of cryptocurrencies were highly correlated in 2018 with correlation growing substantially in the first months of 2019
2. The most correlated cryptocurrency was Ethereum followed by Bitcoin while the least correlated one was TRON
3. The traded volume of cryptocurrencies were also correlated, although significantly less so than prices
4. Bitcoin and Ethereum had the most correlated traded volume
5. In Q2 2019, Stellar and Ethereum had the strongest correlation with other cryptocurrencies, followed by Monero and Cardano
6. In the same time period, Bitcoin SV and Grin have the weakest correlation with other cryptocurrencies, followed by BNB and Bitcoin Cash
7. Bitcoin was the 8th most correlated cryptocurrency and correlated the most with Monero and the least with Bitcoin SV and Grin
8. Over the long term horizon, the least correlated cryptocurrencies over the long term appear to be Tezos, BNB, TRON and Bitcoin SV
9. The least correlated quarter was Q4 2017 while the most correlated one was Q4 2018