Indicator Overview

The Crypto Correlation Index calculates the rolling Pearson Correlation Coefficient between two crypto assets, visualised on a dynamic gradient. The index oscillates between +1.0 (Deep Green), indicating perfect positive correlation where assets move in lockstep, and -1.0 (Deep Red), signaling perfect inverse correlation.

This provides a quantitative measure of how closely two assets are coupled over a specific lookback window. The price of Crypto 1 is overlaid on a secondary logarithmic axis, allowing traders to observe price action simultaneously with shifts in asset synchronisation to identify decoupling events or rotational regimes.

Dual-Ticker Comparison Logic

The ‘Crypto’ fields allow for a flexible analysis of market relationships, enabling users to switch between broad market beta tracking and idiosyncratic asset behavior.

Coupling Analysis: By default, the indicator compares Crypto 1 against Crypto 2 (e.g., ETH vs. BTC). This mode is essential for identifying periods of "correlation clump," where the entire market moves as one, versus periods of "alpha generation," where a specific asset begins to deviate from the benchmark. High positive correlation suggests broad market moves, while a dip toward zero or negative values indicates asset-specific catalysts are taking over.

Market Regime Shifts: Users can adjust the Rolling Window (14 to 180 days) to filter for different market cycles. A shorter window captures immediate reactionary decoupling, while a longer window reveals structural shifts in how two assets relate over multi-month trends. This helps in determining if a divergence is a temporary anomaly or a fundamental change in the assets' market relationship.

How To Use

Deep green zones near +1.0 often signal high-confidence market trends where assets move together, whereas a shift toward yellow or red indicates a breakdown in that relationship. Traders look for correlation peaks as a sign of unified market momentum and correlation troughs (divergence) as early signals of rotation, where capital may be flowing out of one asset and into another.

Monitoring the zero-line is critical; a move from positive to negative correlation suggests the assets have become hedges against one another. Use the SMA toggle to smooth out volatility in the correlation reading, helping to identify the underlying trend of the relationship. When correlation drops while Crypto 1 price remains strong, it may indicate independent strength and a potential breakout from the broader market's influence.