Correlation in the Forex market is the dependence of the movement of currency pairs quotations relative to each other. There is a direct (positive) correlation when the movement occurs in one direction, and the reverse (negative) correlation.
In order to somehow organize this movement, a correlation factor was introduced. It ranges from z1 (complete coincidence) to -1 (absolute opposite). In the foreign exchange market, this indicator depends directly on the economic factor, the proximity of the states and the news background.
The most common are the coefficients created by mathematicians and statisticians Pearson, Spearman and Kendall. We will use them in the Correlation Panel indicator, which is an information panel that shows the relationship between currency pairs as a percentage of -100 to 100.
DaVinci Correlation Panel Settings:
|Choose Correlation Method||Choosing one of three methods for calculating correlation: Pearson, Spearman or Kendall|
|ChooseSymbolsType||Choosing currency pairs to display: All Market Watch – all pairs that are in the market review window (you need to understand that a lot of pairs do not fit on the chart, so it is recommended to choose only the right ones). Simbols List – couples listed by hand pairs in the Simbols List.|
|Simbols List||A list of pairs for analysis, point through the comma without a space.|
|Correlation Period||Period to calculate correlation. The default is 50, which is one of the most used periods.|
|Price||The price type to calculate the indicator.|
|Level Color Value||The value of the correlation level is as a percentage above/below which the data will be allocated in a different color. For the inverse correlation, a minus sign is automatically put up.|
|Show Only High Correlation||Only those correlation values that go beyond the level of Color Valueare displayed.|
|Color Background||The color of the background of the graphics behind the panel.|
|Color Canvas||The color of the translucent substrate.|
|Background Transparent||The percentage of transparency of the substrate.|
|Color Symbols||Color to display currency pairs.|
|Color Values||The color of the correlation values.|
|Color Values Max||Color for values is more Level Color Value.|
|Color Values Min||Color for values is less -Level Color Value.|
As you can see, the settings of the indicator are not much and to understand its work is very simple.
To better represent the correlation, we also attach a graph-building indicator for two currency pairs along all three calculation formulas.
DaVinci Correlation Indicator Settings:
|Pearson Correlation||Activation of the Pearson indicator calculation method|
|Spearman Correlation||Activation of the Spearman indicator calculation method|
|Kendall Correlation||Activation of the Kendall indicator calculation method|
|TimeFrame||The period of data build indicator.|
|Bars count||Number of recent bars to analyze|
|Second Pair||A second pair is manually assigned to calculate the data. The first is taken from the current schedule.|
|Indicator Levels||Display horizontal levels of the indicator.|
This indicator is great for use in your MT4 trading terminal, eliminating the need to view similar statistics on online resources. We are sure that you will find its use.