Skip to main content
Track Correlation analysis
28 / 37
Search the archiveLibrary
Library

2017issue C0728-30

Updating intermarket systems after correlation shifts

Cross-market correlations used as system inputs are not assumed to stay fixed. A mechanical-trading-system built on intermarket-analysis may be updated on a recurring schedule, or the related-instruments may be replaced, so the procedure still tracks current co-movement.

  • Cross-market correlations used as system inputs are not assumed to stay fixed over time.
  • A mechanical-trading-system built on those relationships may need to be updated on a recurring schedule.
  • When relationship-decay appears, replacing the related-instruments is an alternative to rewriting the rules so the procedure still tracks current co-movement.
  • The intermarket relationship is treated as the foundation of a complete trading procedure rather than a one-off chart observation.
Entries in this reading3 entries
Current trackCorrelation analysis52 readingsIntermarket analysis136 readingsMechanical trading system158 readings

A pairing as a system foundation

The archive presents the intermarket relationship as the foundation of a complete trading procedure rather than a one-off chart observation. Intermarket-analysis reads a target market through prices and related series in other markets so one trade sits in a broader portfolio or regime context.

Related-instruments are the other markets or series used as inputs so the system can mimic or hedge the target relationship. A mechanical-trading-system is a fully specified entry, exit, and abstention procedure that can be tested and updated as one set of rules.

Correlations are not assumed to stay fixed

Cross-market correlations used as system inputs are not assumed to stay fixed over time. Correlation-analysis measures whether two or more markets still move together enough to justify a pairing, hedge, or lead-lag rule.

Relationship-decay is a later change in cross-market co-movement that makes an earlier pairing less representative of current conditions.

Update the procedure when the pairing changes

A mechanical procedure built on those relationships may need to be updated on a recurring schedule. When the relationship changes, one alternative to rewriting the rules is to replace the related-instruments so the procedure still tracks current co-movement.

The same procedure in more than one program

Implementations of the same procedure were supplied so the rules could be run and compared inside more than one technical-analysis program.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
28 of 37 in the Correlation analysis track
201748-56 pp.Next on Correlation analysisConstructing a correlation-divergence regime filter for yen and Nikkei contextThe construction measures short-horizon percentage returns on the target and two companion series, then estimates a rolling linear association between the target return and the second-market return.
All readings on this track · 37 readings
  1. 1988Constructing a lead-aware correlation coefficient
  2. 1989A precious-metal price as a changing intermarket equation
  3. 1990Two clocks for copper: a factor regime, a regression baseline, and leftover moving-average timing
  4. 1990Earnings yield, rate correlation and regression for equity value
  5. 1991Name the window, then combine leaders
  6. 1991Constructing a two-market linear correlation check
  7. 1991Constructing a commodity-bond correlation regime filter
  8. 1992Building intermarket context with linear correlation
  9. 1993Inverse-scale overlays as a gold-equity regime filter
  10. 1994Constructing seasonal slots from windows, analog years, and implied volatility
  11. 1995Pin one reference close and roll companion correlations as an overlay
  12. 1995Rolling correlation windows for shifting intermarket regimes
  13. 1998Gold as a cross-market regime barometer
  14. 1999The gold-bond inverse is a regime, not a cause
  15. 1999A nested lag test of gold leading bond yields
  16. 1999Constructing spreads from stock and intermarket correlation
  17. 2000Evaluating headline versus food-and-energy-excluded CPI as bond-yield context
  18. 2005A late EUR/USD fifth wave tested by the Bund-Treasury gap
  19. 2006Intermarket dislocation as context for short-horizon momentum
  20. 2008Map ordinary 12-month outcomes before stacking valuation, rates, and seasonality
  21. 2008A clean-energy theme inside the oil-and-energy regime
  22. 2014Quantitative-easing overlays as fragile belief regimes
  23. 2015Three intermarket checks from the late-2014 crude decline
  24. 2015Basket construction via rank, correlation, and locked rules
  25. 2015Construct a CAD-oil pair from percent-of-range Bollinger maps
  26. 2015CAD/USD and crude: first the correlation, then the band gap
  27. 2017Correlation regime versus moving-average crossover for S&P 500 exposure
  28. 2017Updating intermarket systems after correlation shifts
  29. 2017Constructing a correlation-divergence regime filter for yen and Nikkei context
  30. 2018Clustered negative troughs in an energy-index pairwise correlation
  31. 2018Filter pairwise-correlation before reading an intermarket regime
  32. 2018Moving-average supports in the March 2018 correlation shock
  33. 2020Bond spreads as an equity regime lens
  34. 2020Crash-protection folklore as a correlation regime question
  35. 2020Constructing a bounded correlation-trend-filter
  36. 2020Constructing a correlation-to-line trend filter
  37. 2020Bitcoin correlation regimes across equities and gold
By fieldIntermarket and spreads148 readingsBy year2017100 readings
All 52 readings tagged Correlation analysis
Also on Correlation analysis5 readings
1989A precious-metal price as a changing intermarket equation1990Earnings yield, rate correlation and regression for equity value1991Constructing a commodity-bond correlation regime filter1992Real bond yields as a deficit-share regime1993Inverse-scale overlays as a gold-equity regime filter