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Correlation

EURAUD: Bearish TheoryTwo global economic crises so close together in world history, what are the odds? In 2008, the USA stock market bottomed out and began it's recovery just as the EURAUD pair hit a top and sold off. This correlation to the SPX, from a global market view, is interesting because there is such a great shift from negative 80 to positive 80 in a 4 year span after the 2008 recovery. It will be interesting to learn how this trend plays out in the coming years. The correlation coefficient has been dropping as the prices are starting to diverge negatively again. If it's anything like last time, we could be starting a long-term bearish trend in the pair. Or, the positive correlation holds strong and leads the pair up during the recovery. Or, the least likely scenario, the correlation holds but the pair drops like last time and the SPX goes down with it. Check back in three years.
by The_Arena_Trader
1
SPX500 UP and USD down again? Hey tradomaniacs, for today I`m looking at the correlation of DXY (US-DOLLAR) and SPX500, which are both at points of potential trend-continuation. As mentioned on telegram we have seen a very bearish sentiment of retailers of majors against USD, which is for me a strong reason not to buy the US-Dollar as long there is no fundamental reason. As soon as SPX500 continues its trend we can expect the US-DOLLAR to move down aswell, which would give us a great chance to buy majors such as AUD/USD, NZD/USD, GBP/USD and EUR/USD against the retailers sentiment and with the banks. Still waiting for confirmation! LEAVE A LIKE AND A COMMENT - I appreciate every support! =) Peace and good trades Irasor Wanna see more? Don`t forget to follow me
OANDA:SPX500USD
by Trading2ez
3
BTC: Digital gold trades like goldThe correlation coefficient between gold futures and Bitcoin started out negative for a few years, but after Feb '14 they began to move together. BTC and gold have now been in a five year cycle where the correlation will jump to +72, then drop to a higher low, then up to +72 again, over and over. It seems reasonable that the correlation could soon become stronger than +72 at this rate. It adds validity to the "Bitcoin is digital gold" idea. They are both being traded in an increasingly similar way.
COMEX:GC1!
by The_Arena_Trader
SPX's Correlation with M2 since 1980.Definition Correlation Coefficient (CC) is used in statistics to measure the correlation between two sets of data. In the trading world, the data sets would be stocks, etf's or any other financial instrument. The correlation between two financial instruments, simply put, is the degree in which they are related. Correlation is based on a scale of 1 to -1. The closer the Correlation Coefficient is to 1, the higher their positive correlation. The instruments will move up and down together. The higher the Correlation efficient is to -1, the more they move in opposite directions. A value at 0 indicates that there is no correlation. ---------------------- M2 is a measure of the money supply that includes cash, checking deposits, and easily convertible near money. M2 is a broader measure of the money supply than M1, which just includes cash and checking deposits. M2 is closely watched as an indicator of money supply and future inflation, and as a target of central bank monetary policy. -------------------
SP:SPX
by samitrading
4
Did a bit of ETH to BTC conversion on the Run Up in ETH priceNoticing that the trend has started to reverse, not so sure about converting BTC back to ETH unless ETH corrects very hard...like below 1K again, which might be in the card over the weekend...Why the dump...don't care...probably has something to do with Real Interest Rates rising. Gold got clubbed like a baby seal early in European session, so I guess Gold is now a bit of a leading indicator for crypto...Interesting, will have to make use of this knowledge in the future if the correlation holds up.
Long
by JJMa
BTC, XLM and XRP correlation brokenIf you can hear me, great! If not.. I am highliting that there is a decent amount of correlation going on with XRP and XLM, in comparison with BTC. HOWEVER As of recent, the correlation seems to have swayed to negative correlation. Remember, one coin is based on decentralization, and the other/s are based on the polar opposite, on the side of banks... Also, I said that when BTC corrects to $12-20k, i imagine XRP and XLM will begin a bull run.
BITSTAMP:BTCUSDLong
by Divit_R
Time for DXY to swing up - BTC to correct down?The inverse correlation between USD currency index DXY and BTC is well known. Now DXY is kindly letting us know that it is going to turn its price action up, at least temporarily. There is a very distinct bullish divergence forming on RSI, the same way it formed in August. Then the price of DXY made three lower lows while RSI was moving up before the price started to make higher lows. Now DXY has made its first lower low of that kind. What is BTC going to do if DXY starts going up? It retraces. If things work out as they did in August and September this is how it could go: - DXY makes 1 or 2 more lower lows stopping at the strong support zone around 89 - BTC slows down its ascent and turns its nose down - DXY climbs up to the level of 91.5-92 - BTC retraces 20-25% (in September 21%) taking the price to 22,5-24k support zone - DXY continues its journey down - BTC continues its journey up This is just one plausible scenario. We all know things could go differently, so DYOR. Trade safe and take care. Cheers Whoop
TVC:DXY
by WhooperSwan
BITCOIN Down! RIPPLE Up! This Picture Says it All!Hello everyone, if you like the idea, do not forget to support with a like and follow. This XRP / BTC => RIPPLE / BITCOIN, shows the two most posted two instruments here on TradingView in the last 48 hours , in action and together! As you clearly see, XRP/BTC is sitting at its All-Time-Low (almost Zero) so the most probable movement from here is up. In order for it to move up, we need one of the three scenarios to happen: 1- RIPPLE UP, and BITCOIN DOWN (best case scenario) 2- RIPPLE UP, and BITCOIN UP but with Ripple moving up more aggressively. 3- RIPPLE DOWN, and BITCOIN DOWN but with Bitcoin moving down more aggressively. What do you think? which scenario is more probable?
Long
by TheSignalyst
22
SILVER waiting for a trigger to sellHello everyone, if you like the idea, do not forget to support with a like and follow. on DAILY: SILVER is sitting around strong resistance 27.00 in blue so we will be looking for sell setups on lower timeframes. on H1: SILVER formed a valid trendline in red so now we are waiting for our trigger to confirm the bearish movement. Trigger: Waiting for a momentum candle close below the gray area to sell. and until the sell is activated, this one would be overall bullish and can still dive inside the blue zone. As price approaches our lower green support, we will be looking for buy setups. Good luck!
OANDA:XAGUSDShort
by TheSignalyst
21
BTC and XLM longBitcoin held the VWAP line with avg to low volumes and seems that it's bouncing to keep going with the uptrend. XLM is a bit lagging behind and crossed below the VWAP with high volumes, if xlm will keep going down a very sweet spot for a long position is the yellow zone that represents Volume profile's POC of yesterday's session and the close of the VWAP. They are gonna behave as support and if bitcoin keep the uptrend, xlm will definitively recover and go up. Super tight stop loss around 0.13970 because is this line doesn't hold then it's gonna be a freefall. All this ONLY if bitcoin keeps staying above VWAP. If we see a break of vwap with big volumes, then forget about any long position since the market is gonna correct heavily.
Long
by rosnick
2
BITCOIN: What's driving it? Is 30,000 in sight?In this video I show my theory on what's probably happening with BTCUSD. It appears that Bitcoin is being used to hedge against the US Dollar crashing. $22,000 is certain in sight and who knows it could get to $30,000 sooner than anyone might imagine. I still think that BTC is too volatile for my liking and therefore I've stayed out. I've been happy to avoid FOMO. I've lost nothing. I think that many will profit from a possible further charge north. But there is also still a risk that it BTC could reverse significantly. Best wishes for the Christmas period 🎅and have a Happy Prosperous New Year. 🥂🎁
Editors' picks
BITSTAMP:BTCUSDEducation
by Captain_Walker
29
Don't miss the trade! My bullish setup of crude oil on 2HReasons to buy : 1. Oil is clearly in the uptrend on my weekly & daily chart indicated by my duo MA system 2. Previous flip zone of 42.3ish has been firmly taken out. That's my odds enhancer. 3. 2H bullish setup is actually refined based on the daily demand zone. Fundamentals: 1. With vaccine being distributed in UK and States, it's much more clear that economy will rebound against the backdrop of rising cases. 2. loose monetary policy leads to weaker dollar 3. According to market outlook released by some big institutions, the price range of crude oil is 45 - 55. I don't know their models so it's for your reference. Other Options: If you prefer to hold longer, I'd recommend USO which is an crude oil ETF. Future trading involves leverage which is a bit risky...You gotta have capabilities of managing your positions well. Or you will be stopped out even you bet on the right side.
OANDA:WTICOUSDLong
by JICPT
2
Correlation, diversifying & hedging : An elementary viewOANDA:EURZAR Greetings In the world of forex trading or trading of any financial instrument for that matter, many complex, technical and convoluted words are thrown around in conversations. Such jargon, though is relevant, tends to result in many blank stares especially among some of my peers, many of whom are not finance, economics or statistic fundi's. Many of them with basic education, yearn to be part of these conversations and also contribute their own opinions. This leads to many of them simply offering that awkward nod, wide smile and occasional laugh when everyone else does. they are relegated to conversation observers who's feet seem stuck to the floor. I've been there and that feeling is gut-wrenching, degrading and leads you to view the rest of the crowd as snobs, elitists or braggarts. this then creates apathy toward the subject matter. Well i will try, through this article, to open one of the many back doors to this world. I will attempt to unwrap and "break it down" to bite size chunks so that maybe one day when you are in the midst of the so called "esteemed highbrows", you will also throw in your "two cents". This article will explore the concept of correlation trading. Correlation can also be viewed as the interconnection, interdependence, association or link between. So correlation trading (especially in forex), is basically a statistical measure of the relationship (or association or interdependence) of currency pairs. A simplified example would be if you take the AUDJPY pair. This pair is an association or link-between the AUDUSD and the USDJPY. It would stand to argue that the AUDJPY pair is "correlated" to the AUDUSD and USDJPY. A negative correlation implies that the currency pairs will move in opposing directions while positive correlations tend to move in the same direction. Negative correlated pairs are usually used for hedging purposes. Correlation coefficients range from-1 to +1. A correlation of -1 implies that the two currency pairs will move in opposite directions every time and vice versa if the coefficient is +1. In the past, at this stage of the conversation, I would have switched off looking for how to exit the group, but read further as we further dissect this further. What i have come to appreciate is that you don't have to fully get it the first time, but it will make sense as you progress. So correlations are usually tabulated and presented in different date ranges, namely daily, weekly, monthly, 6 monthly and yearly. A simple example of the EURUSD against USDJPY pair would look like: DAILY +0.44 WEEKLY -0.42 MONTHLY -0.34 6 MONTHLY -0.55 YEARLY -0.85 interpretation Over a period of one year the EURUSD had a strong negative correlation against the USDJPY, meaning that 85% of the time when the EURUSD went up the USDJPY went down. Conversely over the daily time period these pairs were positively correlated. This example was also deliberately drawn up to show the correlations do not always remain the same over time. From the example the effects BREXIT might cause the temporary positive correlation on the daily time range among many other economic factors taking place in Japan. SHOW ME HOW TO MAKE FROM THIS! Now we have some understanding of correlation in forex pairs, here's how the "mashed potatoes mixes with the gravy". We know that the EURZAR and the USDZAR have a very strong positive correlation(I am biased on ZAR: South African Rand since i'm the mother continent), so trading trading on both pairs might not be advisable as it simply doubles your exposure. For instance you buy 1 lot of EURZAR and the same on USDZAR, knowing that these pairs are likely to move in the same direction, will simply double the chances of you losing more if the trade goes against you and vice versa. Lets say you try to get a "one up" on the market like what i tried to do when I started trading by going long on EURZAR and short on USDZAR at the same time. Well my friend that is a contra-trade (a trade that cancels the other) and most of the time you will end in a loss. You might be asking how you will end in a loss if the trades cancel out each other, well firstly these pairs don't always move in the same exact pip range (because they are not 100% correlated) and they have different pip values. Trust me the math doesn't lie, I won't go into it i might lose you at this point. However pairs that are negatively correlated to the EURZAR like the ZARJPY should not take an opposite position. Since we know that when the EURZAR goes up the ZARJPY goes down. So buying (or going long on) EURZAR and selling (or going short on) ZARJPY is the same as buying two position of EURZAR. In other words we have doubled our risk. Some people might say well that the disadvantages stated above can also be utilised to our benefit if we know how to hedge our trades and also bring in diversification. Now this conversation is the one where we graduate to the master class of the inner circle of trading pro's. a friend approached me and enlightened me to the fact you can also diversify your trading portfolio, especially if you have a directional bias on a particular pair. Say, for example, you believe that the ZAR is entering a bullish season, you can diversify by putting a buy(going long) on EURZAR and USDZAR knowing fully well that the American economy has a different bias than the European monetary authorities, therefore by spreading risk between EURZAR and USDZAR will lower losses if the USD goes in the opposite direction quickly, allowing you to adjust your portfolio. This learned friend of mine went on to explain that for pairs that are negatively correlated, like the EURZAR and the ZARJPY can be used for hedging purposes through the use of the different pip values ( PIP is the smallest move in the price of a currency pair). Hedging is the opening of a position with the purpose of offsetting any gain or loss on the other transaction. Assume the value of the pip move in EURZAR is $10 for a lot of 100,000 and the value of a pip move in ZARJPY is $8 or a lot of 100,000. Knowing this can help us hedge our exposure to EURZAR. (Please be aware that certain countries do not allow hedging) Let say i open a position of 1 short EURZAR lot of 100,000 units and 1 short ZARJPY lot of 100,000 units. When the EURZAR increases by 10 pips, the 1 would in a loss of $100 (number of PIPs X Value per PIP). However, since ZARJPY moves opposite to the EURZAR, the short ZARJPY position would be profitable, nearly up to $80 (this is due to the strong negative correlation). This would turn the net loss of the portfolio into just -$20 instead of the full $100. On the flip side this hedge also means smaller profits in the event of a rally down in EURZAR. However, in the worst-case scenario, losses become relatively lower. CONCLUSION All traders regardless at which stage you are, from novice to grand-master, there is need to have an appreciation of correlations and how they affect your portfolio. work towards: 1.Eliminating contra-trades (Trades that cancel each other out) 2.Diversify Risk. By not putting your eggs in one basket. By taking advantage of the imperfect correlations, one can open two positions in the same direction knowing that you limit your exposure to one pair. 3. Potentially double up on profits. In our example above, the high correlation between EURZAR and USDZAR, would mean that if you open a position one of the pairs you can open a similar position on the other pairs thus potentially doubling profits and vice versa. 4. Hedging. This usually results in lower profits, but it also minimises your losses. 5. Confirm break outs and avoid fake outs. Although I did not discuss this aspect in this article, it is the very topic that will be in my next article that i will be releasing next and will sure be topic that will result in all those finance and economics gurus offering you a 2 minute attentive silence, as they nod their heads to your insightful analysis of the markets. You might even get a "let's chat later privately and explore this in depth, or that's exactly what i was about to say". This will leave you walking a little taller, with a bounce in your step, calling shots. All i am saying is if i can do this, surely you can too. Takunda Mudenge is a market analyst based out of Zimbabwe, Africa. He writes in his personal capacity and the information is purely for educational and entertainment purposes and should not be construed or assumed to be investment advice. The information above was collected from various investment websites and literature and all attempts were made to make it into contemporary English.
by takundamudenge
Are we on the verge of a US Bond market drop?Hello. My name is François Normandeau Here is an ADX-BRIEFING related to the 10-Year US Treasury Notes. Currently, on the daily charts, all the indicators we are using are mentioning that the US Dollar Index TVC:DXY is currently in a confirmed downtrend. Historically, there is a strong positive correlation between the US Dollar Index and the US Treasury Notes. if DXY drops, ZN1! drops... if DXY rises, ZN1! rises... relatively speaking and all things being equal If anyone is currently keeping a major long position related to the US Bond market, then this correlation is worth considering. More details about this post, as well as a video analysis, later today, on our site. Wishing you a great week, François Normandeau Institutional Research Director at ADX-BRIEFING
TVC:DXYShort
by Pine_Academy
░░░░▒▒▒▓▓ CBOE Crude Oil Volatility Index ▓▓▒▒▒░░░░Hello. My name is François Normandeau. This is an ADX-BRIEFING video focused on CBOE:OVX The CBOE Crude Oil Volatility Index (CBOE:OVX) can be used in order to identify important trading opportunities. Here, OVX is on the right side of this post. The indicators we see under the price window of OVX mention when the US Oil market TVC:USOIL enters a period of statistically significant volatility . We can then time it with the indicators on West Texas Intermediate in order to determine entries and exits for actual trades. More info can be found in the TradingView IDEA related to this post. Wishing you a great weekend. François Normandeau Institutional Research Director at ADX-BRIEFING
CBOE:OVX
by Pine_Academy
░░░░▒▒▒▓▓ CBOE Crude Oil Volatility Index ▓▓▒▒▒░░░░Hello. My name is François Normandeau. This is an ADX-BRIEFING snapshot focused on CBOE:OVX The CBOE Crude Oil Volatility Index (CBOE:OVX) can be used in order to identify important trading opportunities. Here, OVX is on the right side of this post. The indicators we see under the price window of OVX mention when the US Oil market TVC:USOIL enters a period of statistically significant volatility. We can then time it with the indicators on West Texas Intermediate in order to determine entries and exits for actual trades. More info can be found in the video related to this post. Wishing you a great weekend. François Normandeau Institutional Research Director at ADX-BRIEFING
TVC:USOIL
by Pine_Academy
2
USDJPY correlation with interest rates in backHistorically, USDJPY has had a positive correlation with interest rates. This implies that whenever rates go down, USDJPY follows lower. However, since September this year, rates as seen on the US 10 YEAR YIELD have been rising. USDJPY was falling on USD weakness. Interest rates are rising as the US Federal Reserve has been providing massive QE and financial help to US businesses for recovery. They are trying to manage inflation with a target of 2%. Correlation is back The USDJPY has been moving higher in the past week despite USD weakness suggesting that it's correlation to rates could be back. The Reflation trade As soon as the COVID19 Vaccine starts to roll out around the world in 2021, economies are expected to fully recover by 2023. That's just 3 years away. The US 3 YEAR BOND also shows possible recovery with rates rising since July this year. This is very supportive of my theory that 2021 could see the YEN become weak against the DXY . The 106.0xx is possible target as the level is in confluence with the 0.382 fibonacci level of the previous Bear 🐻 run.
Long
by GrizzlyBearBee