What is the Correlation feature?
- By FXT
- OCT 20, 2022
The Correlation button invokes the correlation matrix, a tool that is useful in identifying symbols that are either correlated or not. This tool is very useful when placing multiple positions across various pairs. There are multiple reasons why correlations are important for traders, in particular for risk management across a portfolio of trades.
By default, it shows the first 20 symbols on your watchlist at the selected timeframe. You can click on specific categories in order to filter out the results (crypto, forex, indices and more). You can change the maximum symbols and the lookback period of the correlation from the dashboard.
In MT4 the Correlation Matrix can be found in the main MarketWatch window on the chart that is using the FXT Navigator.
We can easily spot when there is a high correlation between two assets, from the color. Dark green for the positive correlation and red for negative correlation. Also, the most correlated pair of each line is highlighted with a yellow border.
You can select up to ten pairs, and by clicking the R. Correlation button, the Rolling Correlation Indicator will open. The starting and ending date can also be selected from the Correlation dashboard. The correlation is always related to the selected timeframe. (Example below: D1)
In MT4 we have mean and standard deviation lines when clicking on a pair label as shown below.