How to use currency correlation in forex trading
Correlation in finance is the statistical measure of how two different assets move in relation to each other. A positive correlation exists between assets that tend to move in the same direction. For example, a positive correlation is observed between the value of Australian dollar and Gold as Australia accounts for the majority of world’s gold production.
Conversely, a negative correlation exists between assets that typically move in opposite directions. Such a negative correlation usually exists between the EUR/USD exchange rate and the USD/CHF exchange rate, for example. Understanding market correlations is an important part of trader’s skill set and can be helpful in hedging strategies and trading in general