Asset Correlation Tool v3, improved

2019年6月21日

I found this useful tool among the indicators but it wasn't doing the correlation study correctly.

Everything in markets, with only a few exceptions, are rising in value over time and therefore trended to time. The simplest method I found is to use link relative or first difference detrending, before calculating a correlation between assets.

I also updated it to include more assets, to use the latest Cryptocap indices like BTC.D/ETH.D/TOTAL2 and the top 100 crypto index CIX100. I improved the colour schemes, too

Included in the source code are some other ideas like the FRED:M1 and FRED:M2 (only on daily charts), the Yuan/Yen/EUR/USD, etc. There's lots of scope for correlating unrelated markets.

I'll keep updating it as I use it to find truly correlated assets. Some kind of signal line of known correlations, to subtract from the baseline fuzz of market activity.

Any improvements are most welcome; I'm a novice at best at statistics and build on others' work.

- mabonyi

2019年6月21日

發行說明

Changed to first differences as the default. I already replaced circles with lines, to more clearly see the differences. Small transparency to make it legible.

2020年3月7日

發行說明

This is the latest version for the revised Asset Correlation Tool, now version 4. It has a few striking new features:

• changed the short title to be very short, for those of us using it with 2/4/8 chart layouts
  
• "Same as symbol" timeframe support
  
• min-max normalisation
  
• mean normalisation
  
• z-score normalisation (aka standardisation: mean over stdev)
  
• the differentials will choose first-difference then link relative if both are enabled
  
• the normalisations are mutually exclusive and the first one enabled will be the one used
  
• you can use 1 differential (normal, first difference, or link relative) and 1 normalisation (min-max, mean, or standardise) together
  
• different plot styles and transparency defaults for maximum visibility
  

Example use case was that I saw a drop in correlation between USDCNH and CNYUSD which provided a great signal to trade.

I recommend you exercise caution and try to understand the reason for using the different algorithms. Each differential and each normalisation has its own purpose and this is only a crude tool.

As always, this isn't financial advice, do your own research, etc etc.