Hey, currencies are not stocks they cannot all go down at the same time, thats because you cannot quote dollar alone, only with respect to euro, yen etc... i have question for you guys claiming that correlations go to 1. sure, it's clear that stocks indeed mostly have a correlation of 1 all to one side, but since many of us are trading futures and some of us trading stocks on the short side, this one can just as easily be minus one -1. My question is, can we really know in advance that if there was a black swan say stock market crash, then gold would fall by the approximately same percentage amount. Or maybe it would rise by the same amount as the crash? this question is of some importance to me, because i have at least 4 profitable systems, but trade only one because i dont want to make any silly assumptions about how these systems would correlate between each other. At least this way i know how much exactly a black swan is going to cost me. k
You can always look for past black swans and see how the markets reacted, of course this is not gauranteed to hold in the future.. but large scale correlations (between currencies, markets, etc) change much more slowly than single stocks, sectors, whatever.