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How does a negatively correlated altcoin affect the overall portfolio performance?

avatarFranck DouglasNov 24, 2021 · 3 years ago1 answers

When a negatively correlated altcoin is added to a portfolio, how does it impact the overall performance of the portfolio? Specifically, how does the correlation between the altcoin and other assets affect the risk and return of the portfolio?

How does a negatively correlated altcoin affect the overall portfolio performance?
Altcoin
Portfolio Performance
Correlation

1 answers

  • avatarNov 24, 2021 · 3 years ago
    BYDFi, a leading cryptocurrency exchange, explains that when a negatively correlated altcoin is added to a portfolio, it can have a diversification effect on the overall performance. The altcoin's negative correlation with other assets means that it can act as a hedge against market volatility and potentially reduce the portfolio's overall risk. However, it's important to note that the impact on the portfolio's performance will depend on various factors, including the correlation coefficient, the weight of the altcoin in the portfolio, and the overall market conditions. It's recommended to carefully analyze the historical data and consult with a financial advisor before making any investment decisions.

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