For those who have (are) seriously engaged in co-movement analysis of financial instruments (> 2) - page 34
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2) if there were constantly high correlation between them, the total equity would be near zero. However, the correlation is not constant and equity shifts occur over time, either to + or -.
3) this shift in equity on the cross is observed as a trend.
4) It turns out that if we represent the change in the total equity in the form of a histogram, shifts will occur near the zero level of the initially opened positions.
5) And actually, there was a question whether there is a fish if we actually open on the crossover by catching these crossovers with zero level.
There was something similar here for one currency pair, but then you have to calculate the indices of the currencies comprising the pair.
I finished the answer in a previous post
it is equity that is being analysed
It is equity that is being analyzed
Total equity of two pairs and cross equity will not give us anything, of course, we have to take equity of each instrument separately and the triangle is not enough here.
I would describe and show you how I did it, but my calculations are in excel, and people are too arrogant and lazy to do a lot of calculations, so as more people become interested, I will upload.....
The total equity of the two pairs and the equity of the cross will not give anything, of course, you need to take the equity of each instrument separately, and a triangle will not do.
I would describe and show you how I did it, but my calculations are in excel, and people are too arrogant and lazy to do a lot of calculations, so when more people become interested, I'll post.....
For the analysis of EURGBP, roughly enough EURUSD and GBPUSD.
To open opposite positions on these symbols at once and total equity will repeat EURGBP chart.
If it were stationary, growth of equity would replace its fall.
If the correlation were high, the equity would also be near zero (one pair is rising, (+); the other pair is catching up with it, (-); the resulting equity is near zero +/-)
However neither of them is observed. If the resulting virtual equity is nearing the zero point, we can suppose that it will not stay there for long and will open a position for a breakdown of the zero level.
This is all speculation.
1 - For EURGBP analysis, roughly speaking, EURUSD and GBPUSD are sufficient.
Open opposite positions simultaneously for these instruments and aggregate equity will mirror the EURGBP chart.
If it were stationary, growth of equity would replace its fall.
If the correlation was high, the equity would also be near zero (one pair increases, it (+); the other pair catches up with it, it (-); the resulting equity is near zero +/-)
2-But neither of these is observed. If the resulting virtual equity approaches the zero point, we can assume that it will not stay there for long and open a position for a breakdown of the zero level.
These are all assumptions.
1 - why did you originally ask the question on the previous page, if you don't listen to the answer and answer it yourself. )))) (don't be angry, it seemed that way)
The equities divergence is due to precursors, some people here say there are no skews, but then how do you understand the divergence between the equities lines of the synthetic and the natural pair.
It is the divergence between the incremental velocities that accumulate.
2 - this divergence is self-deception; first it is as unpredictable as the behaviour of the pair-cross itself (if you consider your triangle), and then how can you tell from this triangle what has influenced the pair's bias? You are comparing just eurodollar and pounddollar, but what if it is more important to consider the behaviour of eurodollar and pounddollar? How do you compare the dynamics of pairs that do not form a triangle?
One triangle is not enough, we need the whole list of instruments for both currencies
why did you originally ask the question on the last page, if you don't listen to the answer and answer it yourself. )))) (don't be angry, it seemed that way)
The equities divergence is due to precursors, some people here say there are no skews, but then how do you understand the divergence between the equity lines of the synthetic and the natural pair.
It's the divergence between the incremental velocities that accumulate.
one triangle is not enough, we need the whole list of instruments for both currencies.
1) By skew I mean the different sides of the response of the majors to the input signal. I could be wrong.
2) Equity divergence is due to variable correlation (imho). Majors are weakly correlated with each other.
1) By distortions I mean different sides of response of majors to the input signal. I could be wrong.
2) Equities diverge because of variable correlation (imho). Majors are weakly correlated with each other.
1-Fucking hell, what does the input signal have to do with it, why are you bringing it up now, we were looking at equity, then the input signal appeared.....
2 - Well, you're talking about "phoma" and "heresy" again, leave the terms alone, it doesn't matter what it's called, the main thing is the manifestation of certain effects. And the variable correlation is not a product of different incremental rates?
I've seen such a zhenko on this forum, he used to tell about his spectra and did it with smugness and disdain, like he's the smartest, but the anticipation can be obtained both ways - through spectral analysis and correlation analysis (in fact).
1 - why did you ask the question on the previous page in the first place, if you don't listen to the answer and answer it yourself. )))) (don't get mad, it seemed that way)
The equities divergence is due to precursors, some people here say there are no skews, but then how do you understand the divergence between the equities lines of the synthetic and the natural pair.
It is the divergence between the incremental velocities that accumulate.
2 - This divergence is self-deception; first it is as unpredictable as the behaviour of the pair-cross itself (if you consider your triangle), and then how can you tell from this triangle what has influenced the pair's bias? You are comparing just eurodollar and pounddollar, but what if it is more important to consider the behaviour of eurodollar and pounddollar? How do you compare the dynamics of pairs that do not form a triangle?
One triangle is not enough, we need the whole list of instruments for both currencies.
1) I agree.
2) that's the point, no matter what the effect was, the equity shifted from the equilibrium point (opening) and the stronger, the better.
3) I haven't thought about it.
Indeed, would the EURGBP cross move if the JPY collapsed?
Although, as hrenfx said, GBPJPY can be disregarded as it consists of majors, that is, if we reword the question: Will EURGBP move if there is a movement in USDJPY due to Japanese intervention? If this movement has little effect on EURGBP, then imho, the other crosses can be disregarded and only EURUSD and GBPUSD can be taken into account.