Correlations are great for trade signals, spreading risk, position size management, market tendencies and a few other things that someone may be into in today's markets. ET has had a few threads in the past 10 years about these topics but there didn't seem to be much conversation about such.
Correlated futures pairs
- Thread starter isaac000
- Start date
Eurodollar calander spreads seem to have very high correlation and cointegration along with good liquidity
for a few years out.
Having taken a first trade of this type lately( steepener for the last couple weeks in this stock rally),
the commisions with IB $4.02 for a single spread and selling the bid and buying the ask, worst case, is a considerable fraction of the expected move.
With zirp and a glance at a 10 year chart, well, this market isnt what it used to be. (That has been said
many times on ET already)
for a few years out.
Having taken a first trade of this type lately( steepener for the last couple weeks in this stock rally),
the commisions with IB $4.02 for a single spread and selling the bid and buying the ask, worst case, is a considerable fraction of the expected move.
With zirp and a glance at a 10 year chart, well, this market isnt what it used to be. (That has been said
many times on ET already)
hi wrbtrader
thanks for your post
i am thinking about futures pairs to spread trade against one another which have a high level of correlation.
wheat vs wheat
sugar vs sugar
nasdaq vs s+p
gilt vs bund
btp vs oat
cocoa vs cocoa
currencies vs other currencies etc
and surely many many other combinations ??
thanks for your post
i am thinking about futures pairs to spread trade against one another which have a high level of correlation.
wheat vs wheat
sugar vs sugar
nasdaq vs s+p
gilt vs bund
btp vs oat
cocoa vs cocoa
currencies vs other currencies etc
and surely many many other combinations ??
Start watching the annual flies and condors for more volatility.
Yes, i see what you mean. I plotted +2015-2016-2016+2017 which is close to a +red-green-green+blue fly.
The 1st leg is a steepener that loses a little and the 2nd half is the flattener that dominates.
It trends about 25 bp.over the last year at $100 per bp.
Thanks i will test my commissions and margin on this combo in IB's spreadtrader.
I mean flies like M6/M7/M8 and condors such as Z8/Z9/Z0/Z1, not the whole cal strip.
There is plenty of opportunity in the annual flies and condors. Some of them are volatile and the bid/ask spread is usually .005-.01 pts wide, not much of an impediment. $25 a point and commissions for IB are $20/RT.
Personally, I start out looking at 2 years in terms of correlation timeframes and mining possible pairs. And I use common sense to further pare down the non-sensical stuff ( like rubber vs gold ).
If you do not have access to a Bloomberg terminal, I would highly recommend CSI over MRCI. Also, really check these results using chart overlays - don't trust anyone's data at face value. Finally, use some short charting timeframe intervals with your overlays to check for viability, wandering, and cointegration-like tendencies. If the charts seem promising, I would then spend at least a few weeks looking at the product order books (market ladders are best) placed side-by-side on your execution platform.
You should also expect to ferret through MANY of these possible combinations before you find something that inspires enough confidence to trade it live. Two of the most prominent strategies for these combinations are lead-lag and synthetic intramarket spreads.
Good hunting and best of luck. This is indeed a very worthwhile endeavor if you have the drive and determination to put in the work. No free money anywhere - it all takes sweat equity and working smart and not just hard.
If you do not have access to a Bloomberg terminal, I would highly recommend CSI over MRCI. Also, really check these results using chart overlays - don't trust anyone's data at face value. Finally, use some short charting timeframe intervals with your overlays to check for viability, wandering, and cointegration-like tendencies. If the charts seem promising, I would then spend at least a few weeks looking at the product order books (market ladders are best) placed side-by-side on your execution platform.
You should also expect to ferret through MANY of these possible combinations before you find something that inspires enough confidence to trade it live. Two of the most prominent strategies for these combinations are lead-lag and synthetic intramarket spreads.
Good hunting and best of luck. This is indeed a very worthwhile endeavor if you have the drive and determination to put in the work. No free money anywhere - it all takes sweat equity and working smart and not just hard.