Correlation Matrix

Correlation
Matrix

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Manage Risk

Correlations Grid

Color-Coding Function

Highlight Sub-Sections

The Correlation Matrix helps you to manage risk and trade with greater confidence. The tool shows a grid of the correlations between pairs of trading symbols. It is an overview of all the options available, and it will handle any symbols which are available in the underlying trading platform, allowing a calculation of the correlation of metals and equities – if available – against forex. For detailed inspection of the correlation between any two instruments, you can drill down using the Correlation Trader tool.

Features

The grid is displayed not only as numeric values (ranging from -100 to +100), but also using simple color-coding which helps you identify strong or weak correlation at a glance.

You can change the basis of the calculation, selecting a timeframe such as M15 and a number of historic bars, based on the most appropriate time period for the length of trade which you are expecting.

Highlighting strong or weak correlation

The tool lets the trader highlight sub-sections of the grid, e.g. isolating symbols which are strongly or weakly correlated against each other.

‘What if’ scenarios

The tool can calculate an average correlation between all the symbols in which you have an open position. The tool also lets you select any basket of symbols and then calculates the average of the current correlations between them. This enables you to assess the internal risk of a prospective portfolio of trades which they are currently considering.


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About correlation: Correlation can have a major effect on trading risk. For example, if EURUSD and USDCHF have been strongly correlated, then a trader who had open positions in both would have seen very similar profits on each position. In effect, the trader did not have two positions; they only really had one position. (They will either have seen similar profits or losses on each position, or they will have seen matching profits and losses which largely cancelled each other out.)

Data source: FX Blue Labs

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, investment advice or investment recommendation or solicitation for the purpose of buying or selling of any financial instrument. All information provided is not a guarantee or reliable indicator of future performance.

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