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Thread: Hedging

  1. #31
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    Quote Originally Posted by vmcd62 View Post
    I suppose it could be a viable system if this what ForexForSmarties is actually doing...I think it is..or something similar..

    As far as the risks from involving all three currencies..I suppose the 'correlation factor' still holds, but just involves three...
    I don't think you can look at it that way. While the idea that the EUR and the CHF are pretty correlated currencies, you would not say that either is particularly correlated with the USD. I've never heard of a three-way correlation (though I won't claim to be a statistician either). Having exposure to all three currencies means to me that in at least one place you are going to have an exposed risk that isn't at least partially offset by another currency.

  2. #32
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    Quote Originally Posted by rhodytrader View Post
    I don't think you can look at it that way. While the idea that the EUR and the CHF are pretty correlated currencies, you would not say that either is particularly correlated with the USD. I've never heard of a three-way correlation (though I won't claim to be a statistician either). Having exposure to all three currencies means to me that in at least one place you are going to have an exposed risk that isn't at least partially offset by another currency.
    Maybe a statistician or an economist can jump in here and tell us how correlated the 3 are....what we may find more useful is an analysis of three two-way correlations..EUR-USD, USD-CHF, EUR-CHF..at least I would find it useful. It would tell me, e.g., if A one goes up/down, how often does B follow or go the other way, and likewise for the rest...A and C, and B and C
    Last edited by vmcd62; 01-18-2007 at 01:13 PM.

  3. #33
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    Quote Originally Posted by vmcd62 View Post
    Maybe a statistician or an economist can jump in here and tell us how correlated the 3 are....what we may find more useful is an analysis of three two-way correlations..EUR-USD, USD-CHF, EUR-CHF..at least I would find it useful. It would tell me, e.g., if A one goes up/down, how often does B follow or go the other way, and likewise for the rest...A and C, and B and C
    I assume that you don't mean the following three correlation tests:
    EUR to USD
    USD to CHF
    EUR to CHF

    You mean these, right?
    EUR/USD to USD/CHF
    EUR/USD to EUR/CHF
    USD/CHF to EUR/CHF

    I've very confident that the only one that will show a meaningful correlation, by and large, is the first pairing, and that will be a negative one. I really don't feel like running a regression right now.

  4. #34
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    Quote Originally Posted by rhodytrader View Post
    I assume that you don't mean the following three correlation tests:
    EUR to USD
    USD to CHF
    EUR to CHF

    You mean these, right?
    EUR/USD to USD/CHF
    EUR/USD to EUR/CHF
    USD/CHF to EUR/CHF

    I've very confident that the only one that will show a meaningful correlation, by and large, is the first pairing, and that will be a negative one. I really don't feel like running a regression right now.
    Yes..the second tests...I'm sure you're absolutely correct... ....might as well close this thread....

  5. #35
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    Quote Originally Posted by chrisw1 View Post
    Colin, your post on correlations was awesome, and really helped me understand a bit more about what I have been doing. I was a little bit skeptical about all the hype I have heard about forex trading, so I enjoyed getting into the "guts" of it reading your information.

    I went ahead and just opened up a FreedomRocks demo account, to get more reality on the whole thing. After I made enough "play" money, I decided to try it with real money. I guess I came in at the right time, because I am actually up 55% in the past 9 days.

    -Chris
    Freedomrocks.com/31026
    Congratulations Chris...

    Can you tell us what trades you made in those 9 days..if you don't mind

  6. #36
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    Hi! In this link is a calculator of correlations. I see that for a 90 days period, there is a negative correlation between EUR/USD and USD/CHF, but is a low correlation of -13.

    The stronger correlation I found is between EUR/USD and GBP/USD, to be 70% correlation in daily view and more than 80% in 1 hour view.

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