Correlation (Forex)
Definition
A statistical measure showing how two currency pairs or financial assets move in relation to each other, ranging from +1 (perfect positive) to −1 (perfect negative) correlation.
Formula / Rules
Pearson Correlation Coefficient: r = Σ(Xi − X̄)(Yi − Ȳ) / √[Σ(Xi − X̄)² · Σ(Yi − Ȳ)²]
Example
EUR/USD and GBP/USD often show high positive correlation since both are priced against the U.S. dollar.
Related Terms
Frequently Asked Question
What is Currency Correlation in Forex?
Currency correlation measures how two pairs move together. EUR/USD and GBP/USD are positively correlated (~0.7-0.9). USD/CHF and EUR/USD are negatively correlated. Used for diversification and hedging.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.