40) How to Measure Correlation Between Assets in a Portfolio
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- Опубліковано 9 лют 2025
- This video covers best-practice systematic trading processes for measuring correlation between two assets. It considers examples centered around Forex currency pairs, Stock Indices, and Commodities. The approach uses the Coefficient of Determination R-Squared and the differences in prices over a specified time period as the basis for the correlation measure.
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Content Disclaimer: Past performance is not a reliable indicator of future results. The contents of this video (and all other videos by the presenter) are for educational purposes only, and are not to be construed as financial and/or investment advice.
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Great video. Thanks.
Any Webpage where one can find the correlations in your described way, with chooseable timeframe?
I understand martyn, but wouldn't it be better to examine the correlation between the percentage returns of different assets?
Before I opened the video, i was thinking about doing this by %, I suppose the direction of the correlation would remain the same (negative or positive) but the magnitude might be different. I'll try to make a nice google spreadsheet to automate this... I hope Googlefinance doesn't crap on me
Amazing teacher - it makes so much sense. Would love to have a dynamic portfolio 'selection' function that chooses assets that are uncorrelated to ALL assets within the portfolio. Ray Dalio calls uncorrelated diversification his holy grail!!
I am probably assuming here, but I imagine you could apply the same 'difference of direction' to calculate the correlation between two strategies... Perhaps you would look at the change in return of two different strategies (when trading the same asset and within the same timeframe). This gives you an indication of their correlation to perform in different market conditions... (e.g when a trending strategy is profiting, a mean reversion strategy may be losing etc).
Really powerful tools you are sharing, thank you again
Sir i am programming an algo in pine script but i am confused how can i determine whether the market is sideways /ranging. Please give some tips