Trailing Forex Correlations

Trailing Forex Correlations

The following calculator plots the 40-day and the 120-day trailing correlations for the last 100 trading days. To plot a correlation chart simply pick the names of two currency pairs from Selector's drop-down menu and the chart will be automatically created for you. There are 30 currency pairs for which you can plot correlation charts. The total number of different charts that can be plotted is 435 (30*29/2).

The two pie charts below the trailing correlation chart show the percentage of the total time (i.e. the number of days) that the short-term (40 days) and the long-term (120 day) correlations stay within each of the correlation zones, which are defined as follows:

  1. Weak:absolute value of the correlation coefficient doesn't exceed 0,3.
  2. Medium: absolute value of the coefficient is greater than 0,3 but less than 0,5.
  3. Strong:absolute value of the coefficient is bigger than 0,5 but smaller than 0,8.
  4. High: the absolute value of the correlation coefficient is equal to or greater than 0,8.

Note: The fastest way to find currency pairs whose correlation is consistently high or weak is to start from the REL correlation table. This table makes it easy to spot those currency pairs whose short-term and long-term correlation curves converge in one of the correlation zones during the last few trading days - which increases the chances that they spend most of their time in the same correlation zone (i.e. that their correlation is consistent).  Once you have identified weakly or highly correlated pairs on the REL table, you can plot their correlation charts here to see how closely their current correlation level corresponds with the overall correlation (i.e. distribution of time spent in each of the correlation zones) that these pairs showed during the last 100 trading days, as is shown by the pie charts below.