This calculator demonstrates how two time series move in relation to each other when they are correlated to a certain degree. You can simulate the correlation over two different-length time series - with 20 and 40 cases, respectively.

Correlation measures how closely two currency pairs (or forex trading system returns) move together. If both pairs move up and down in perfect unison then their correlation coefficient is +1. If the movement of one pair doesn't tell anything about the movement of the other pair then there is a zero correlation between these pairs (they are uncorrelated). If two pairs move in exactly opposite directions then their correlation coefficient is -1.  

To see how time series actually behave at any level of correlation simply enter the value of the correlation coefficient into one of the "Target Correlation" fields below. You will notice that when you set the target correlation to the same value for both calculators, the actual correlation will usually be closer to the target value (as measured by their "Difference") when it is calculated over longer time period (40).

You can think of A and B as the prices of two imaginary currency pairs or the returns of two fictitious forex trading systems. You might wish to review the latest correlation data for the commonly traded currency pairs at the currency correlations page. For detailed simulation of the performance of two correlated currency trading systems please visit the system correlation simulator (Please note: The size of this page is 0,7 Mbs and it requires that you have Flash installed and Javascript enabled in your browser).