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The atgPairsCorrelation indicator plots the correlated logarithmic returns of two data series. The inputs to the indicator are standard price series data. The indicator internally generates the logarithmic returns and calculates and plots the correlation between them.
The indicator plots a value that ranges between -1 and +1. A positive value means that the two data series are correlated ( moving together ) while a negative value means they're moving in opposite directions. The magnitude of the value expresses the fidelity of the correlation. A value of 1 is achieved if you compare an instrument with itself.
Special thanks to @Oysteryx for making this possible.
A chart template that configures the indicator is attached to this post.
The template assumes that the ES daily data series loaded on the chart. The chart series is always compared with one other series that the indicator loads internally. You may of course use any data series you want on the chart and in the settings for the indicator to run correlation studies on pairs of interest to you.
To use this template load it on a chart of the ES with at least 365 days of daily data. This template loads 7 instances of the atgPairsCorrelation into a single chart panel so that they plots are overlaid.
You must maintain the property settings for each instance so that the contract months are current.
Spreads
For running a correlation on an interest rate spread you must enter the two instruments involved in the spread into SpreadLeg1 and SpreadLeg2. In addition you must enter weights for each leg of the spread. the CME publishes these weights here:
They are frequently changed so be sure to check it regularly.
The SecondInstrument parameter ( set to ES 09-15 ) is ignored if SpreadLeg1 and SpreadLeg2 are populated.
The CME weights found on the aforementioned web page for each leg are specified in SpreadLeg1Weight and SpreadLeg2Weight.
Here are some basic property settings to configure the indicator to compare the ES to the 6J contract ( USDJPY futures contract ):
For running a correlation on an interest rate spread you must enter the two instruments involved in the spread into SpreadLeg1 and SpreadLeg2. In addition you must enter weights for each leg of the spread. the CME publishes these weights here: https://www.cmegroup.com/trading/interest-rates/files/ics-ratios-2015-12.pdf
Here's how to configure a correlation of the ES to the spread between the ZN and ZT ( 10 year - 2 year US treasury bond futures contracts ).
You should update the zip file download instead and add a small text section for changelog, then make a post here that you've done so. I will read the post, and then send out notice emails to everyone who downloaded the file so they know the new file is available.
One thing I don't like about this indicator is that the correlation function is inefficient. In fact that's an understatement. It loops through the correlation period 5 times! It should not loop even once. My next priority is finding or coding a replacement algorithm.
I understand that's because I did 2 changes on the 8th? If so then changing the 2nd entry in the changelog from 9/8 to 9/14 should fix it? I've done that now.
No, sorry. My mistake. I am catching up on hundreds of posts I've not had a chance to read over the last few days and didn't realize your post was from the 8th.
We don't send out notification updates twice in one day so it wouldn't matter.
