What is currency correlation in forex?

The measure of the extent to which currency pairs move in the same or opposite direction is called correlation in forex. Currency correlation helps to minimize the risk factor and increase the reward. Forex trading includes the trading of different currencies that are of different nationalities with one another.

What does correlation mean?

A statistical measure referring to the extent of linear relationship between two or more variables, in other words, of the degree to which the movements of two currency pairs are related. For example, if two currency pairs have a high correlation, their prices tend to rise and fall in sync.

What if correlation is 0?

If the correlation is 0, the movements between two currency pairs are said to have uh ZERO or NO correlation, they are completely independent and random from each other . We have no idea how one pair will move in relation to the other.

What is the correlation coefficient of a currency pair?

The correlation coefficient ranges between -1.0 and +1.0. A correlation of +1 implies that the two currency pairs will move in the same direction 100% of the time. A correlation of -1 implies the two currency pairs will move in the opposite direction 100% of the time.