Below is our monthly correlation update for October. As we have consistently said, the correlation between different currency pairs is bound to change over time. Therefore, it is important to know about these changing relationships to fully understand your operations and portfolio. Below are the correlations for one, three, six and twelve months for the seven major currency pairs. In addition, we have included six-month correlations for major currencies against EURUSD to look at different correlations.
To be an effective trader, it is important to understand how different currency pairs move in relation to each other (and in relation to other markets). There are several reasons why this is important, but most importantly, it allows traders to understand their net risk. This risk goes beyond buying or selling excess currency in relation to its various parties. The core of the market is a fundamental link that strengthens and weakens depending on what is happening in the market. A comparison and contrast of a portfolio consisting of EURUSD and AUDUSD, with a portfolio consisting of EURUSD and AUDUSD, underlines this development. Comparing the correlations between large companies today and just a few months ago or a year ago, we see that the consistency is much smaller. What is the difference between that period and today? Appetite for risk. Just a few months ago, the demand for revenue and the lack of financial turmoil pushed all stocks that were too high or too low in the degree of risk. A year ago it was the other way around: sharp fears pushed all markets down. Currently, the outlook for capital growth has stabilized and the binding impact of the risk trend has begun to decline. However, we see that the market is ready to update its links. By maintaining the status of reserve currency, the US dollar has changed its role against risk against currencies with different levels of yields. On the other hand, the correlation between the price movement of EURUSD and AUDUSD over the last month has cooled (0.74). At the same time, the relative role of the Swiss franc as a safe haven has not prevented a significant reduction in the close correlation between EURUSD and USDCHF price actions (-0.94), suggesting that economic ties remain a key force. in market speculation. Forex. .
As a demonstration of increases and decreases in risk in price action, we can observe decreases and increases in correlations over time. Following the establishment of a six-month correlation basis, we saw that the EURUSD / USDJPY correlation strengthened (-0.22) last month as the risk trend shifted the growing fear and shift of hedging between the yen and the dollar to the best shelter names of sure. , so they say. This is a time when risk appetite tends to increase. For comparison, look back at the six months to March; and a drastic change in the practical risk model results in a correlation with zero (0.08). In general, having this knowledge will allow traders to effectively diversify their portfolio and manage it over time.
Regardless of your trading strategy and whether you want to diversify your positions or look for alternative pairs to take advantage of your point of view, it is important to keep in mind the correlation between different currency pairs and changing trends.
Currency correlation (data from October 1, 2009)
To be an effective trader, it is important to understand how different currency pairs move in relation to each other (and in relation to other markets). There are several reasons why this is important, but most importantly, it allows traders to understand their net risk. This risk goes beyond buying or selling excess currency in relation to its various parties. The core of the market is a fundamental link that strengthens and weakens depending on what is happening in the market. A comparison and contrast of a portfolio consisting of EURUSD and AUDUSD, with a portfolio consisting of EURUSD and AUDUSD, underlines this development. Comparing the correlations between large companies today and just a few months ago or a year ago, we see that the consistency is much smaller. What is the difference between that period and today? Appetite for risk. Just a few months ago, the demand for revenue and the lack of financial turmoil pushed all stocks that were too high or too low in the degree of risk. A year ago it was the other way around: sharp fears pushed all markets down. Currently, the outlook for capital growth has stabilized and the binding impact of the risk trend has begun to decline. However, we see that the market is ready to update its links. By maintaining the status of reserve currency, the US dollar has changed its role against risk against currencies with different levels of yields. On the other hand, the correlation between the price movement of EURUSD and AUDUSD over the last month has cooled (0.74). At the same time, the relative role of the Swiss franc as a safe haven has not prevented a significant reduction in the close correlation between EURUSD and USDCHF price actions (-0.94), suggesting that economic ties remain a key force. in market speculation. Forex. .
As a demonstration of increases and decreases in risk in price action, we can observe decreases and increases in correlations over time. Following the establishment of a six-month correlation basis, we saw that the EURUSD / USDJPY correlation strengthened (-0.22) last month as the risk trend shifted the growing fear and shift of hedging between the yen and the dollar to the best shelter names of sure. , so they say. This is a time when risk appetite tends to increase. For comparison, look back at the six months to March; and a drastic change in the practical risk model results in a correlation with zero (0.08). In general, having this knowledge will allow traders to effectively diversify their portfolio and manage it over time.
Regardless of your trading strategy and whether you want to diversify your positions or look for alternative pairs to take advantage of your point of view, it is important to keep in mind the correlation between different currency pairs and changing trends.
Currency correlation (data from October 1, 2009)
Written by Jamie Settle
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