GlossaryAsset correlation (Gold)
Asset correlation (Gold)
How closely your chart's symbol and gold move together, as a strength from 0 to 100. Only the strength of the relationship is shown, not its direction: high values are the warning sign, because whatever moves closely with gold does not spread risk against gold.
Zones
| Zone | Range |
|---|---|
| Very high correlation | from 75 |
| High correlation | 50 to 75 |
| Medium correlation | 25 to 50 |
| Low correlation | below 25 |
The axis is fixed from 0 to 100, reference lines are at 25, 50 and 75, and the area above 75 has a light red background.
How to read it
- High values: Your symbol and gold are moving closely together or closely against each other. Whether they move in the same or in opposite directions can only be seen by comparing the two prices.
- Low values: The two move independently; a mix spreads risk.
- Shifts: If the curve jumps from low to high, the relationship between the two markets has changed, for example in a phase when both react to the same macro news.
Limitations
- Prices, not returns: The price levels are correlated. Two markets that both rise in the window reach a high correlation, even if their daily moves have nothing to do with each other. For the relationship between daily moves, this measure is only an approximation.
- Window in candles: 90 candles are 90 days on the daily chart, 90 weeks on the weekly chart.
- Frequency: Gold comes as a daily value. On hourly candles you correlate against a staircase; the study is meant for daily to weekly charts.