A word of advice : never, ever trust these "correlations", they can change dramatically over a short period of time.
For instance the correlation EUR/USD and GBP/USD went from +93% to minus 37% in less than a month on the 4h charts.
ES correlation with currency markets.
- Thread starter trader1974
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A word of advice : never, ever trust these "correlations", they can change dramatically over a short period of time.
For instance the correlation EUR/USD and GBP/USD went from +93% to minus 37% in less than a month on the 4h charts.
Exactly, I think you're right, you have to be careful with this because the correlations suddenly change and all the money made can evaporate.
It is not that easy.
Sometimes the best indicator of price is the price itself.
It is not that easy.
Sometimes the best indicator of price is the price itself.
CannonTrading_Ilan
Sponsor
I asked my colleague John Thorpe on his thoughts:
The inter market correlations that MRCI puts together over the Past 180 days are correlative values or Negative correlative values on a daily closing basis only, not over the course of a few days.
The grid shown several times in this thread will therefore not be helpful in answering your question.
Try this, pull up a daily chart on the equity index of your choice and overlay it with the Japanese yen.
A strong Jap Yen often precludes a US Equity sell off.
The inter market correlations that MRCI puts together over the Past 180 days are correlative values or Negative correlative values on a daily closing basis only, not over the course of a few days.
The grid shown several times in this thread will therefore not be helpful in answering your question.
Try this, pull up a daily chart on the equity index of your choice and overlay it with the Japanese yen.
A strong Jap Yen often precludes a US Equity sell off.
Here are the monthly charts of the Yen and the S&P500.
There is no clear evidence of a positive or negative correlation between these two markets.
Again, using "correlation" as a timing device is a recipe for disaster.
CannonTrading_Ilan
Sponsor
Using correlation only is not a trading technique in our opinion. However, noticing short term correlations or negative correlations as they take place and using it as a secondary confirmation/clue is something worth exploring like the following out of memory that I noticed for short term trading these past few months:
Crude oil/ Stocks inverse correlation prior to COVID, inverse relationship between bonds and stocks couple of months ago, gold and dollar and there are other examples for noticing rhythm between markets even if it only lasts for a few weeks.
Crude oil/ Stocks inverse correlation prior to COVID, inverse relationship between bonds and stocks couple of months ago, gold and dollar and there are other examples for noticing rhythm between markets even if it only lasts for a few weeks.
Well, if a rigorous backtest reveals some interesting correlation patterns that the trader can exploit in the short term why not.
And what do you think of the future of vix?
Tradex gave you the right answer, the only thing that I know that correlates consistently is the VIX & treasuries, everything else correlates till it doesn't. If you are going to set-up a strategy based on correlation or use inverse correlation for hedging, be prepared to constantly change the instrument to reflect whatever the flavour of the month is.
Gold and silver also have an interesting correlation