Correlation indicator. - page 2

 
Sergey Vradiy:
A very popular strategy: trading pairs with inverse correlation to hedge risk.

But that's just silly.

 
Maxim Dmitrievsky:

but it's stupid.


What is stupid about it?

 
Ibragim Dzhanaev:

What is the stupidity in it?


Lack of logic and knowledge

 
Maxim Dmitrievsky:

But that's just silly.

Suppose EURUSD and USDCAD have a negative correlation at some time interval. At the same time we receive sell signals for both pairs. In this case, if we make a loss on one pair, we will make a profit on the other pair at the same time. At some point, the situation in the market changes. We close one position with profit, while the other one is open. We open the second pair again, but this time it is a buy position. That position which was in the red, gradually turns into a profit, we also close it. This is how we obtain equalization. If we have 6-8 hedging instruments of this kind, we obtain a good portfolio optimized in terms of risk and profitability.
 
Maxim Dmitrievsky:

in a lack of logic and knowledge


Can't find the logic?

Or can't make a living out of it?

 
Sergey Vradiy:
Suppose EURUSD and USDCAD have a negative correlation at some time interval. At the same time we obtain sell signals for both pairs. In this case, if we make a loss on one pair, we will make a profit on the other pair at the same time. At some point, the situation in the market changes. We close one position with profit, while the other one is open. We open the second pair again, but this time it is a buy position. That position which was in the red, gradually turns into a profit, we also close it. This is how we obtain equalization. If we have 6-8 hedging instruments of this kind, we obtain a good portfolio optimized in terms of risk and profitability.

We get nonsense both with the first variant and with an increase in the number of pairs we get multidimensional nonsense

 
Ibragim Dzhanaev:

Can't find the logic?

Or can't you make money from it?


what exactly is the question?

 
Sergey Vradiy:
Let's say EURUSD and USDCAD have a negative correlation at some time interval. In this case we obtain sell signals for both pairs. In this case, if we make a loss on one pair, we will make a profit on the other pair at the same time. At some point, the situation in the market changes. We close one position with profit, while the other one is open. We open the second pair again, but this time it is a buy position. That position which was in the red, gradually turns into a profit, we also close it. This is how we obtain equalization. If we have 6-8 hedging instruments of this kind, we obtain a good portfolio optimized in terms of risk and profitability.

Wrong.

 
Maxim Dmitrievsky:

what exactly is the question?


Don't see the logic in the correlation ?

 
Ibragim Dzhanaev:

You don't see the logic in correlation ?


Only for fundamentally dependent processes, e.g. European indices like DAX vs FTSE and some others. And there is no need for correlation as it is already clear that it tends to 1.

I don't see it in forex as these are random dependencies that change randomly