The Correlation Matrix helps you to manage risk and trade with greater confidence. The tool shows a grid of the correlations between pairs of trading symbols. It is an overview of all the options available, and it will handle any symbols which are available in the underlying trading platform, allowing a calculation of the correlation of metals and equities – if available – against forex. For detailed inspection of the correlation between any two instruments, you can drill down using the Correlation Trader tool.
The grid is displayed not only as numeric values (ranging from -100 to +100), but also using simple color-coding which helps you identify strong or weak correlation at a glance.
You can change the basis of the calculation, selecting a timeframe such as M15 and a number of historic bars, based on the most appropriate time period for the length of trade which you are expecting.
Highlighting strong or weak correlation
The tool lets the trader highlight sub-sections of the grid, e.g. isolating symbols which are strongly or weakly correlated against each other.
‘What if’ scenarios
The tool can calculate an average correlation between all the symbols in which you have an open position. The tool also lets you select any basket of symbols and then calculates the average of the current correlations between them. This enables you to assess the internal risk of a prospective portfolio of trades which they are currently considering.