Correlation between the S&P 500 and bitcoin crested near an all-time high earlier this week, according to new data from Coin Metrics. On Monday, the Pearson 180-day correlation reached 0.4905 before a steep decline to 0.36 on Tuesday.
Source: Coin Metrics
Correlation, expressed as a number between -1 and +1, indicates the type of relationship between assets. A positive number indicates that movement by one coincides with similar movement of the other, while a negative number indicates an inverse relationship. Numbers close to zero indicate little to no relationship.
Investors usually aim for low correlation between assets in their portfolios in order to limit volatility. A 0.49 correlation is considered moderate.
Monday's level came close to eclipsing the March 14 all-time high, when correlation reached 0.4999. That level coincided with the first week of market fallout from the coronavirus pandemic, with mass sell-offs driving the relationship. At that time, assets across Wall Street became increasingly correlated.