Correlation measures the relationship between two items and shows how prices changes in one instrument affect the price of the other.
The object is to see how dependent one instrument is on the price of the other.
The result of the correlation study is a single number that is the historical correlation for the entire compared history of both symbols.
For example, if doing a correlation on weather and a specific crop, such as wheat or corn, you will see a high positive correlation, indicating the weather has an effect on crop prices.
The correlation result will be measured in a range of +1.0 to -1.0. The closer the result is to + or – 1.0 the greater the relationship is between the two instruments.
A correlation of +1 means changes in the price of one instrument will be identical. For example, the price of crude will affect the price of heating oil. If crude goes up, it’s likely that the price of heating oil will also go up.
A correlation of -1 means changes in the price of one instrument will affect the price of the other, but in the opposite direction. For example, you would see a negative correlation between the value of the dollar and the price of gold. If the dollar value is up, the cost of gold is down. If the dollar value is down, the cost of gold will rise.
Parameters:
Symbol — data source symbol.
Symbol — data source symbol.
Example with defaults: CORL (QRB@1,@C@1).
Adding the Correlation Study to a Chart
- Click on the Studies & Filters button on the docked pane window.
- Click on the plus sign to expand the Studies and then click the plus sign to expand the Standard Studies
- Find the Correlation study, drag and drop it on the chart
Or
- Right-Click on a blank part of the chart and select ADD STUDY.
- In the dialog box, Under Data Source, you will find a list of charts and studies in the window. Select the one on which you want the new study to be based.
- Under Studies, select the Correlation study to add to the window.
- Under Add To, select the stack you want to add the study to, or select <New Stack> to create a new stack for the study.
- Click OK to exit.