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Evaluating correlations
Started:July 6th, 2013 (03:52 AM) by keymoo Views / Replies:368 / 1
Last Reply:July 6th, 2013 (03:52 AM) Attachments:0

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Evaluating correlations

Old July 6th, 2013, 03:52 AM   #1 (permalink)
Elite Member
Bedford, UK
Futures Experience: Beginner
Platform: SierraChart/TT Feed
Favorite Futures: NQ
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Posts: 129 since Mar 2012
Thanks: 212 given, 198 received

Evaluating correlations

I am using Sierra Chart and attempting to evaluate an unbiased correlation between two markets. By "correlation" I am also including inversely correlated (for example EURUSD, USDCHF are pretty nicely inversely correlated most of the time).

The idea is I trade a basket of instruments on the higher TFs (60min+) that are reasonably uncorrelated. Trouble is correlations change over time as market dynamics change and underlying fundamentals drive correlations towards or away from each other.

In Sierra Chart I am using the Correlation Coefficient study to evaluate on a daily chart to get a rough idea how correlated two markets are. The question is, am I using the right study? I believe I am. What settings should I use? I am currently using a 21-day period which will show a moving correlation coefficient over the past 21 trading days on my chart. If you are interested in trying this on Sierra Chart I did a video on how to set it up:

Here's a chart of how correlated the NQ is to the DAX:
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Thanks for any comments, suggestions or ideas.

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Old July 6th, 2013, 03:52 AM   #2 (permalink)
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