Traders often calculate correlation between different instruments, such as stocks and ETFs, or Forex currency pairs. It is important to know if you portfolio is properly diversified. Highly correlated instruments in your portfolio will tend to go up and down together compromising your diversification strategy. Keeping an eye for high correlations (positive or negative) is even more important to Forex traders, since currency pairs often exhibit high positive or negative correlations due to market conditions or having similar market drivers.… Read more...