Currency correlation measures the extent to which two currencies have moved in the same ,opposite or random directions within a particular period of time. Currency correlation can help you to hedge or diversify your exposure to the forex market. Currency correlation helps to identify forex trading opportunities and manage risk exposure. A positive correlation of +1 shows that two currency pairs will move in the same direction always. A negative correlation of -1 states that two currencies will move in opposite direction all the time. A zero correlation means that the two currencies move in an opposite direction and are not related at all.
Correlation in forex tells us about the extent to which two currency pairs are moving in a same, opposite or some random direction. This is studied for a particular period of time. It really helps to catch hold of new opportunities and reduce the risk involved in trading. The numbers are similar as for any other type of correlation. Correlation of +1 shows that currencies move in the same direction, -1 shows that currencies move in the opposite direction and 0 correlation shows that their movement has no relation with the each other.
It simply measure the relationship between two trading assets and shows the extent to which two currency pairs move whether in the same, different or random directions.
They represent how two currencies are related to each other and express their relationship as +1 or -1. Forex correlation helps traders to formulate better trading strategies and take sound decisions. Knowledge about currency correlation helps traders to reduce risks ,hedge and diversify their trading instruments.