Interpretation & Pitfalls

How to read correlation numbers without fooling yourself.

Correlation vs. Beta

Correlation measures co-movement directionally. Beta also accounts for relative volatility. An asset can have moderate correlation to BTC but high beta if it moves more aggressively.

Outliers and “Event Days”

Single extreme moves can dominate correlation calculations, especially on short samples. Rank-based methods (Spearman) can sometimes reduce this sensitivity.

Stablecoins and “Artificial” Correlation

Stablecoins can appear uncorrelated with crypto risk assets, but that does not mean they reduce portfolio risk in the same way — they remove price volatility by design.

When Low Correlation Isn’t Diversification

• Illiquid assets can print stale prices, lowering measured correlation.
• Different trading venues can introduce timing gaps.
• Correlation can be low in calm markets and jump during crises.