Portfolio correlation

Correlation is a measure of how similar a strategies is to each other, in other words how often they conclude and conclude transactions at the same time.

The correlation coefficient takes values ​​from -1 to 1.

The interpretation of the coefficient is as follows:


The coefficient is -1

This is a mirror image of the strategy


The coefficient is 0

No correlation between strategies, perfect condition


The coefficient is 1

The strategies are identical


What values ​​should you look for?


The rule is simple, the closer to 0 the better, for both positive and negative values.

Maximum values ​​should be in the range of -0.4 to 0.4, higher coefficients indicate too similar similarity of the strategy using them in one portfolio will increase the risk of trading.


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