Stock Market & Crypto Indexes Correlation
Key Insights
- Bitcoin shows little correlation with major US stock indexes, moving independently.
- Bitcoin is highly correlated to the Chinese stock market, implying shared drivers.
- The high 0.82 correlation coefficient indicates a statistical relationship between Bitcoin and the SSE Composite prices.
This article provides an insightful analysis of the correlations between major crypto market and traditional stock market indexes.
Examining these relationships through correlation charts, Sharpe Ratio metrics, and more, offers a data-driven look at how crypto performs against stocks.
Crypto & U.S. Stock Indexes Correlation
A graph of the correlation between BTC and ETH and leading US stock indexes such as the Nasdaq 100, S&P 500 and U.S. Dollar Index over the past 30 days shows a very low degree of connection, in some cases negative.
This means that changes in the price of Bitcoin don’t have a strong relationship with the price movements of the mentioned indexes. In this context, the low correlation may indicate that the factors affecting Bitcoin prices are less dependent on the events or drivers of these indexes.
However, it’s worth noting that Bitcoin is currently highly correlated with the Chinese stock market. This means that changes in the price of Bitcoin are more closely related to price movements in the Chinese stock market. This correlation can be the result of various factors including news, regulations, and investment activity in China.
BTC & the SSE Composite Index Correlation
A correlation graph between BTC and the Shanghai Stock Exchange SSE Composite index shows us to assess the degree of relationship between these two assets. If Bitcoin has a decent interrelation with the price movement of the SSE Composite index (which reflects the state of the world's second largest economy), it may indicate a similar direction of price movement.
Thus, the positive correlation between Bitcoin and the SSE Composite may be of interest as it may suggest that there is a statistical relationship between these assets.
External factors like global financial events and market volatility may influence both assets and contribute to a positive correlation. Economic events and factors in China such as changes in GDP, inflation, trade policies, and others may also influence market conditions and investment activity.
Chinese investors and companies may show interest in cryptocurrencies as a means of investment and portfolio diversification, and this interest may affect the price of Bitcoin.
The correlation coefficient, which measures the degree of statistical relationship between the value of Bitcoin and the SSE Composite index, is 0.82. This significance implies that changes in SSE Composite and Bitcoin often go in the same direction. In other words, when SSE Composite prices rise, Bitcoin values is also more likely to rise, and vice versa. This may indicate this certain statistical correlation between the two assets.
In thisThe Sharpe Ratio metric for Bitcoin is -0.21, while for the SSE Composite, it is -0.22. case, the correlation coefficient of 0.82 between the value of BTC and the SSE Composite index (Shanghai Stock Exchange index) implies that changes in SSE Composite and BTC prices often move in the same direction.
Sharpe Ratio & Sortino Ratio metrics
Over the past 30 days, assets are also correlated with respect to risk and return.
The Sharpe Ratio metric for Bitcoin is -0.21, while for the SSE Composite, it is -0.22. These values are below zero and indicate a poor correlation between risk and expected return over the past 30 days. Investors typically seek a positive Sharpe Ratio because it means they receive a higher expected return for every unit of risk they take.
The Sortino Ratio metric, which is similar to Sharpe Ratio but pays more attention to the risk associated with negative rewards, also shows negative values for Bitcoin (-0.27) and SSE Composite (-0.32). These values indicate that over the period, asset returns were below the expected risk-free rate and this loss was not offset by risk.
Summary
As a result of the last 30 days, the following conclusions can be drawn regarding the correlation of BTC with Nasdaq 100, S&P 500, and U.S. Dollar Indexes. First, there is a low correlation between Bitcoin prices and the mentioned U.S. indexes. This implies that changes in the value of Bitcoin are less dependent on events affecting the U.S. stock markets.
Besides, Bitcoin shows a high correlation with the Chinese market, and this could be the result of various factors including news and investment activity.
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