Stock Correlation performs a correlation between two lists or between a list and individual stock or index symbols. A correlation between two symbols is a number between 1 and -1. These are the relationships:
Stock pairs trading takes advantage of stocks that have long term correlation but recently the correlation has broken down. The objective is to profit when the
Forex Correlation reappears. Take a stock and find stocks that correlate with it for a 200 day period. Save that list. Then find stocks
in that list that are now uncorrelated for the last 5 days. Form a pairs trade that profits when the correlation reappears.
- Highly Correlated - A correlation of 1 or near 1. This means the two symbol's close prices move up and down together in the time period of correlation.
- Inversely Correlated - A correlation of -1 or near -1. This means the two symbol's close prices move up and down opposite to each other in the time period of correlation.
- Extremely Non-Correlated - A correlation of near 0. This means
Stock pairs trading takes advantage of stocks that have long term correlation but recently the correlation has broken down. The objective is to profit when the
Forex Correlation reappears. Take a stock and find stocks that correlate with it for a 200 day period. Save that list. Then find stocks
in that list that are now uncorrelated for the last 5 days. Form a pairs trade that profits when the correlation reappears.
