how to judge independence of 2 strategies?

Discussion in 'Strategy Building' started by zedDoubleNaught, Jul 16, 2010.

  1. Suppose you have 2 strategies in Forex. One is on EURUSD, the other on GBPUSD. How do you figure if they are independent or following the same moves? It's important because when you look at the win ratios to get an estimate of the return, the probability estimate will be different if they are independent or not. If the EURUSD is 40% and GBPUSD is 40%, then independent would mean the probability of both winning would be 20%; if dependent would mean 40%.

    My ideas for now are figure a score based on:
    - time of entry (closer means less independence)
    - direction (always same direction or opposite direction means less independence, a 50-50 split between same and opposite means more independence)
    - win vs. losing (more dual wins or losses means less independence, a 50-50 split means more dependence)

    I don't know how to figure this, looking for ideas or suggestions.