Showing posts with label Delayed correlations. Show all posts
Showing posts with label Delayed correlations. Show all posts

Tuesday, March 2, 2010

Delayed correlations

Once upon a time I looked at pairs of stocks that moved in a similar manner. That is, they tended to move up and/or down together. For example sister stocks and pairs trading.

Recently, I've become more interested in a stock ABC that moves ahead of stock XYZ.
That is, ABC reacts to market forces (I love that phrase!) before XYZ.
Then, when ABC moves, look carefully at ABC.

So I have this spreadsheet that downloads daily prices for a couple of stocks and calculates the correlation ... with one of the stock prices shifted by a day or three.

One might expect that many pairs move together.
When the price of gold goes up (down), you'd expect gold stocks to go up (down) together, without delay.
Goldcorp and Barrick Gold, for instance:

I play and play but can't find no neat pairs ... yet!

Wanna play?