Pair ratio
What does dividing one asset's price by another's reveal that neither price shows on its own?
In plain words
A pair ratio is one asset's price divided by another's, tracked over time. It answers a relative question: is the first asset gaining or losing ground against the second, regardless of whether both are rising or falling in money terms?
Why it matters
Two assets can both rise, but one can rise less and quietly underperform. A ratio separates relative performance from overall market direction, which matters when a position is effectively a bet on one asset against another rather than on the whole market.
In a real week: ETH, week of 14 December 2020
In the week of 14 December 2020, ETH rose 8.02% in dollars while BTC rose more, so the ETH/BTC ratio fell 11.69%. Both moved in the same direction, with BTC making the larger weekly move. ETH returned 14.3 percentage points less than BTC. Traders long ETH against BTC would have lost ground even though ETH's dollar price rose.
A common mistake
Reading a rising ratio as a rising price. The ratio can fall while both assets rise in dollars, as it did here, so relative and absolute performance must be read separately.