Correlations (under estimated / misunderstood)? Looking for Insight...

Discussion in 'Forex' started by twoplus2is1, Oct 5, 2006.

  1. New to FX markets. From what I’ve gathered in the past couple months, correlations (aka, directional relationships, inter-relationships, parallel vs. inverse) seems to be an overlooked and under estimated and even misunderstood part of what a novice trader needs to be keenly aware of from the get go when learning FX. It’s taken me weeks to finally see how important ‘correlation’ awareness is when trading currencies. When first introduced to FX, I didn’t pay attention to this at all; I do now!
    Having said that, I’m getting past the novice stage and into intermediate. Looking to get as much insight into correlations / directional relationships as I can before I move on.
    I’ve come across some good links to give the correlation numbers for different periods of time. But I am looking for more info than what these numbers offer. Oanda’s ‘HeatMap’ version to visually show correlations is something different; but also looking for anything out there that goes further; something I may not be aware of as a novice, or are the links below all I would need to focus on?
    Any articles, info, links, etc, to pass on would be helpful to get as much insight into correlations as possible.

    Also, Having printed out these pages above, I noticed the numbers for the same time periods differ. Some numbers are the same but others are different. Example; aud/usd and eur/usd for 1 month period on Oanda link shows .74 vs. ..FXDaily’s .55 for same period of 1 month. Is there a reason why? Are there different mathematical approaches to get correlations? If so, then which numbers do I follow? I would have thought the numbers from site to site would be nearly the same.

    Also, How do I get one chart to visually show the correlation between any specific two currencies but without printing out two charts? This picture below is what I’m looking to do to visually see how and when they are parallel or inversed; looking for various time frames as well. Is there a link online to get a visual correlation of specific currencies? I can basically do this by printing two charts, but would like to get them on one page.

  2. Anyone?.....

    I guess the importance of Relative Strength Analysis could also be included with the topic of correlations....any further info would be helpful...
    ...slowly trying to fit the pieces of this FX puzzle together.