@helms
The correlation between different cryptocurrencies plays a crucial role in managing portfolio risk. If assets like Bitcoin and Ethereum have a high positive correlation, their prices tend to move in the same direction, increasing the risk of large portfolio swings. Conversely, holding assets with low or negative correlation can help diversify risk, as their prices might move independently or inversely. By spreading investments across different assets with varying correlations, investors can reduce the overall volatility of their portfolio, potentially protecting themselves from drastic market movements.
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