Currency pairs do not move in isolation. Understanding correlations allows traders to predict secondary market movements and build balanced portfolios.
1. Types of Correlations
Positive Correlation: EUR/USD and GBP/USD usually move together.
Negative Correlation: EUR/USD and USD/CHF typically move opposite.
2. Using Correlation in Analysis
Monitoring correlation coefficients helps traders avoid redundant exposure and manage leverage.
3. Hedging Techniques
Advanced hedging uses correlated instruments to offset losses. Examples include pairing USD/JPY with gold or using cross-currency pairs to neutralize volatility.
No comments:
Post a Comment