Correlation Stability Index (CSI)

correlation stability forex trading

Forexhit.com is proud to introduce the new measure of correlation stability between currency pairs – the Correlation Stability Index (CSI). The Correlation Stability Index was designed to help forex traders quickly identify currency pair combinations which tend to consistently exhibit certain levels of correlation –high, strong, medium or weak.

The Correlation Stability Index combines the information from the REL correlation table (which highlights those currency pair combinations whose trailing correlation curves converge) and the Trailing Correlations Calculator. In effect, the Correlation Stability Index is the measure of how consistently the correlation curves of the currency pair combinations displayed on the REL correlation table move close to one another – as can be seen from the Trailing Correlations Calculator. The currency pair combinations from the REL table are arranged into high, strong, medium or weak correlation groups and ranked based on the CSI (starting with the highest value).

Note: Of particular interest are the currency pair combinations with the highest value of the Correlation Stability Index displaying either low or high level of correlation. Forex traders who prefer to diversify their forex trading portfolios might wish to select those currency pair combinations which are the least correlated AND have the highest Correlation Stability Index. The currency pair combinations with high level of correlation and strong CSI can be used to cross-confirm various technical signals (e.g. checking for false trendline breakouts, Elliott Wave completions).

The values of the CSI are color-coded for easier interpretation. The REL values are coded in the same colour as on the REL table.

Correlation Stability Index Color Codes

 

High Forex Correlation

 

High Forex Correlations

 

Strong Forex Correlation

 

Strong Forex Correlation

 

Medium Forex Correlation

 

Medium Forex Correlation

 

Weak Forex Correlation

 

Weak Forex Correlation

 

Correlation Stability Index Color Codes