Correlation
The statistical relationship between two currency pairs, indicating how they move relative to each other (together, opposite, or independently).
What is Correlation?
Correlation measures how two currency pairs move in relation to each other, ranging from +1 (move together) to -1 (move opposite).
Correlation Types
| Value | Meaning | Example |
|---|---|---|
| +1.0 | Perfect positive | Both rise/fall together |
| +0.5 | Moderate positive | Often move together |
| 0 | No correlation | Move independently |
| -0.5 | Moderate negative | Often move opposite |
| -1.0 | Perfect negative | Move in opposite directions |
Common Forex Correlations
Positive correlations:
- EUR/USD & GBP/USD (both rise when USD weakens)
- AUD/USD & NZD/USD (both commodity currencies)
Negative correlations:
- EUR/USD & USD/CHF (EUR up = CHF up vs USD)
- AUD/USD & USD/JPY (risk-on vs risk-off)
Why Correlation Matters
- Avoid doubled risk (trading correlated pairs)
- Find confirmation signals
- Hedge positions
- Understand market dynamics
Our Currency Strength Meter shows all 8 currencies, revealing correlations automatically.