What is currency correlation?

Currency correlation, then, tells us whether two currency pairs move in the same, opposite, or totally random direction, over some period of time. When trading currencies, it’s important to remember that since currencies are traded in pairs, that no single currency pair is ever totally isolated.

What is correlation in forex trading?

Correlation is a term which is used to depict when two currency pairs in the context of forex trading tend to exhibit the same characteristics. This could mean; two currency pairs could rally in unison or decline together. One of the most common ways to trade the forex markets is to look at a currency pair in isolation.

What currency pairs are negatively correlated?

For example, EURUSD and USDCHF are two of the most common negatively correlated currency pairs. This means, if you are long on EURUSD, you would not go long on USDCHF or vice versa. Depending on the time frame you are trading, currency correlations can be an important aspect.

What is a correlation coefficient?

Correlation, in the financial world, is the statistical measure of the relationship between two securities. 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.