Unit 5 · Level 4 · Macro & Correlations
Correlations & risk-on/risk-off
Correlation measures how assets move together (+1 lockstep, −1 mirror, 0 unrelated). In RISK-ON moods, stocks, crypto and commodities rally together; in RISK-OFF, they dump together while the dollar and bonds catch the fleeing money. Your 'diversified' portfolio may secretly be one big bet.
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What you get asked
Tech stocks, BTC, ETH and growth ETFs: five positions. In a crash, this portfolio behaves like…
Correlations SPIKE toward 1 in crises; diversification evaporates precisely when it's needed. Count your true bets, not your tickers.
Match the regime to classic behavior
Watch DXY and yields next to your charts for a week and you'll never unsee the strings.
Bitcoin has historically traded like a high-beta ___ asset in macro terms, whatever its long-term thesis.
The digital-gold thesis may win the decade, but on Fed days BTC has mostly traded like leveraged Nasdaq. Trade the correlation that IS, not the one promised.
Real diversification, then, means…
Some that earn in risk-off (bonds, cash yield) next to your risk-on book. Drivers, not tickers. This sets up the portfolio unit next: building a book where something always breathes.
Your five 'independent' setups all fire long this week: tech, BTC, SOL. The correlation-aware adjustment:
The 1% rule matures into a PORTFOLIO rule: cap correlated risk, not just per-trade risk. This is how pros survive regime flips. 🐜
The rest of this unit
Rates, inflation, risk-on/off and the tide under every asset you trade.