a Correlation Question

Discussion in 'Technical Analysis' started by gummy, Nov 2, 2005.

  1. Really dumb. If your stock have a linear correlation of -1, they won't "move" in the same direction. A correlation of -1 refers to the returns. Two stocks can go up because of their average return over a period of time, but will go up alternating their returns (one will go up for a time step while the other will go down, etc...). The final result is that both stocks have gone up in the average, but their respective paths with respect to that mean are exactly opposite.

    Just a message for everyone who doesn't understand that : just abandon trading. You better go and sell cabbages at the local store.
     
    #21     Nov 5, 2005