Forex correlation: the currency correlation table, daily and weekly

It's how much two currency pairs move together. It's measured with a number from −1 to 1: near 1 they move the same, near −1 the opposite, and near 0 each goes its own way.

It's the same idea seen from the currencies. Two pairs correlate when they share a currency, or when the same news moves both. Here you get the number for 28 main pairs, daily and weekly, and the finder gives it for any pair among the 23 currencies.

Pairs that share a currency tend to look alike, because that currency moves both. Those that carry the dollar as the quote currency, like EURUSD, GBPUSD, AUDUSD and NZDUSD, tend to move together, and those that carry it as the base, like USDCHF, USDCAD and USDJPY, tend to move the opposite way to them. The table gives you today's number, and the finder gives it for any pair.

Look for the cells near 0 in the table, from −0.19 to 0.19: each of those pairs goes its own way. It changes with the period, so check the three periods before you count on it.

Before you open a new trade, look up the pair of that trade and see how much it moves with the pairs you already have open. If the correlation is over 0.8 buying both, or under −0.8 buying one and selling the other, you're repeating the same trade. Then the risk you take is the risk of two, even if you think they're two different ideas.

You can build a strategy around it, but I use correlation for something simpler: to know how much I'm risking in total before I open the second trade. The entry is always decided on the chart, and on the chart you wait.

Each row and each column is a pair, and each cell is the correlation between the row pair and the column pair. The diagonal is always 1, because a pair moves exactly the same as itself. Look for the dark green cells, where they move almost the same, and the dark gold ones with a minus sign, where they move almost opposite.

With Pearson's correlation between the log returns of the two pairs, which are the change of each day (or each week) measured with the logarithm so the changes can be added. The calculation is explained step by step, with real numbers, in "How we calculate it and how to check it."

With 0.8, the two pairs move in the same direction most of the time; with −0.8, in the opposite one. In practice, buying both (with 0.8), or buying one and selling the other (with −0.8), is almost opening the same trade twice.

Look at the three periods. If the short one and the long one say the same, the relationship holds, and if they don't match, it's usually changing. That's why the table has 1, 3 and 6 months on the daily, and 6 months, 1 year and 2 years on the weekly.

Because what moves each currency changes with time: central banks, inflation, jobs and the news of each country. Two pairs that went together six months ago can split apart today, so you have to look at the correlation of now.

The ones that move in opposite directions, which show in gold with a minus sign in the table. A typical case is EURUSD and USDCHF, because in one the dollar is the quote currency and in the other the base. If you buy both, part of it cancels out; if you buy one and sell the other, both are betting on the same thing.

For this table, the daily and the weekly, which is where we speculate calmly. On minute charts correlation moves faster, that's true, but we decide with what holds for weeks and months.

This page is one: you type a pair and it tells you which pairs move with it and which move the opposite way, with the period you choose. There's no sign-up and no ads, and you can see how it's calculated.

No. The daily is redone every business day after the ECB publishes its fixing, around 16:00 in Frankfurt, and the weekly changes every Friday. For those of us who trade the daily and the weekly, the movement of every minute adds nothing.

Yes: type its name in the finder and tick the box for the 253 crosses of the 23 currencies, and the pairs with the Norwegian krone, the rand or the Mexican peso come in too.