Correlation indicator. - page 2
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A very popular strategy: trading pairs with inverse correlation to hedge risk.
But that's just silly.
but it's stupid.
What is stupid about it?
What is the stupidity in it?
Lack of logic and knowledge
But that's just silly.
in a lack of logic and knowledge
Can't find the logic?
Or can't make a living out of it?
Suppose EURUSD and USDCAD have a negative correlation at some time interval. At the same time we obtain sell signals for both pairs. In this case, if we make a loss on one pair, we will make a profit on the other pair at the same time. At some point, the situation in the market changes. We close one position with profit, while the other one is open. We open the second pair again, but this time it is a buy position. That position which was in the red, gradually turns into a profit, we also close it. This is how we obtain equalization. If we have 6-8 hedging instruments of this kind, we obtain a good portfolio optimized in terms of risk and profitability.
We get nonsense both with the first variant and with an increase in the number of pairs we get multidimensional nonsense
Can't find the logic?
Or can't you make money from it?
what exactly is the question?
Let's say EURUSD and USDCAD have a negative correlation at some time interval. In this case we obtain sell signals for both pairs. In this case, if we make a loss on one pair, we will make a profit on the other pair at the same time. At some point, the situation in the market changes. We close one position with profit, while the other one is open. We open the second pair again, but this time it is a buy position. That position which was in the red, gradually turns into a profit, we also close it. This is how we obtain equalization. If we have 6-8 hedging instruments of this kind, we obtain a good portfolio optimized in terms of risk and profitability.
Wrong.
what exactly is the question?
Don't see the logic in the correlation ?
You don't see the logic in correlation ?
Only for fundamentally dependent processes, e.g. European indices like DAX vs FTSE and some others. And there is no need for correlation as it is already clear that it tends to 1.
I don't see it in forex as these are random dependencies that change randomly