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Correlation Index

Correlation Index implements the equation of correlation coefficient (ρ). Correlation is a measure of dependence between two securities. The formula of the equation can be found at https://en.wikipedia.org/wiki/Correlation_and_dependence

We generally consider that

  • EURUSD moves to the same direction as GBPUSD =>positive correlation
  • JPY, CHF, Gold move to the same direction=>positive correlation
  • oil moves to the opposite direction of USD=>negative correlation
  • ....

But how strong is this dependence? Do the above relations remain constant as time passes? Could a strong positive correlation (say ρ=0.82) become weak (e.g., ρ=0.43) or even negative (e.g., ρ=-0.21) or even strong negative (e.g., ρ=-0.7)?

The Correlation Index will respond to the above questions as it will show how correlation coefficient evolves through time.


Parameters

  • Bars Used for Calculations - the number of bars used to calculate correlation. Proper values - from 20 to 220.
  • Pair - the security with which the correlation is calculated. Proper values could be any security (e.g., EURUSD, GBPUSD, USDJPY, AUDUSD, AUDJPY, USDCAD, DAX30, DJ30, S&P, ...).
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