An allocator holding three digital assets usually believes they are three positions. The correlation of their daily returns is the test of that belief, and it is straightforward to compute from closes anybody can download.
0.94
Bitcoin against ether, ninety days
0.93
Bitcoin against solana, ninety days
0.93
Ether against solana
0.95
Bitcoin against ether, thirty days
Source: Coinbase Exchange daily closes. Computed by Institutional Asset Journal.
Ninety-day correlation, bitcoin and ether
Pearson coefficient on daily log returns.
Source: Coinbase Exchange daily closes. Computed by Institutional Asset Journal.
Why realized rather than implied
Implied volatility is a price, set by whoever is selling options, and it carries a risk premium. Realized volatility is an observation: what the asset actually did. For sizing a position the second is the input, and for judging whether options are expensive the difference between the two is.
How this was measured
- Prices are Coinbase Exchange daily closes, chosen over an aggregated mid because a single regulated venue is a defined measurement and a blend of venues is not. Realized volatility is the standard deviation of daily logarithmic returns over the stated window, annualized by the square root of 365 rather than 252, because this market trades every day. Correlations are Pearson coefficients on daily log returns over the same window. Drawdown is measured from the highest prior daily close in the series, not from an intraday high. A piece dated one day uses closes through the day before.
