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Feb 05, 2021  |  Commentary

Correlation Analysis of Digital Assets, Gold, and US Equities

Authored by William Cai

The digital asset space has significantly evolved over the past several years. In December 2020, bitcoin breached its all-time high of $20,000 achieved in December 2017 (and rallied from a low near $3,000 in December 2018). It has been quite a journey in terms of price movement, but perhaps more importantly, the past three years have seen continuing institutional acceptance and adoption of digital assets.

Bitcoin remains the leader and bellwether of digital assets in terms of market cap, institutional investments, etc. But let us take a look at how other digital assets have matured in the meantime. Correlation is a good measure to examine whether different digital assets have their own distinct identities or does the entire asset class still move closely together. We will further compare the results to examples in the US equities market. And lastly, a comparison to gold is useful in these hectic times with the talk of safe-haven assets and inflation hedges.

Digital Asset Correlations

Below, we are taking the current top 10 digital assets by market cap (excluding stablecoins) and running correlations number for the last 3 years.


Data: Bloomberg 12/31/2017 to 11/30/2020

The average correlation of the top 5 digital assets vs. each other is 72.6% and 63.2% for the top 10. The average correlation of the top 10 to S&P 500 (using SPY as proxy) is 20.7%.

Now, let us take a look at how things were in 2018.


Data: Bloomberg 12/21/2017 to 12/31/2018

In 2018, the average of the same top 5 digital assets was 71.8% and 60.8% for the top 10. The average correlation of the top 10 to S&P 500 was 8.4%. It appears that even though the digital asset space has matured in the past three years and seen more institutional adoption, the prices of the top digital assets, even with their distinct use-profiles (payment, virtual machine, exchange token, etc.), remain highly correlated. The average correlation to S&P 500 has gone up from 8.4% to 20.7%, potentially signaling more mainstream adoption but also indicating that digital assets are still quite risky.

Comparison to Correlations within Equities

Before we conclude there is a muted correlation benefit across the top digital assets, let us look at US equities for any parallels. Below are the numbers in the same 3-year period for the top 10 S&P 500 stocks and major financial stocks in the US.

Bloomberg2 bloomberg3

Data: Bloomberg 12/31/2017 to 11/30/2020

The average correlation of the top 5 S&P stocks vs. each other is 69.8% and 57.4% for the top 10. The average correlation of the top 5 financial stocks vs. each other is 77.2% and 71.1% for the top 10.

                                              Top 5                    Top 10

Digital Assets                     71.8%                   60.8%

S&P 500 stocks                 69.8%                   57.4%

Financial stocks                77.2%                   71.1%

The digital asset intra-correlation numbers do not compare unfavorably to top S&P 500 stocks and top financial stocks. In other words, if one is picking and investing in different stocks within the S&P 500 or top financial stocks, it would be reasonable to pick and invest in different digital assets as well rather than choosing a single investment to represent the whole space.

A Check on Running Correlations

Taking a final look at the numbers to see if there are trends or discrepancies hidden within the single correlation numbers calculated over three years. Below are 60-day (3-month) running correlations.

top cryptos

Data: Bloomberg 12/31/2017 to 11/30/2020

The correlations are running against bitcoin, and we see no clear trends. There are periods of low correlations or price movement divergences. These are common occurrences when we look at a similar analysis of the top 10 S&P 500 stocks.


Data: Bloomberg 12/31/2017 to 11/30/2020


This in-depth analysis of digital asset correlations has revealed that although the space has seen continuous development and adaptation, the prices of digital assets remain correlated. However, the degree of correlation does not compare unfavorably to the top financial and S&P 500 stocks, indicating some distinction of digital asset uses and price correlation benefits. Lastly, from a correlation perspective, digital assets remain more correlated to US equities vs. gold’s correlation to US equities – thus as of now, a lesser safe-haven asset or hedger than gold.