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CORRELATIONS BETWEEN MARKETS AND CURRENCY.

Definition of "related" = bond that can exist between two or market indicators.
All financial markets the world belong to the same system, and in one way or another are all connected, either directly or inversely related appointments.

A trader is almost forced to keep an eye on your operating system platform, major cross currencies, indices of major world stock markets, commodities, and finally the best, consider the effect that movements of a certain instrument may be compared to what you are dealing with.

But because you have to take into account the correlations?
A Trader pua reduce the overall risk of the portfolio, simply by holding instruments between them are not perfectly correlated, which means you can reduce exposure to risk by diversifying activities and products. If all assets have the basket perfect correlation "1", the volatility the same, being the sum of the volatility of individual activities, be greater compared to a similar case where the correlations are also inverse.Ricapitolando:

1. To avoid increasing a position when two instruments are positively correlated;
2. To avoid negating the results of an operation by opening another on another cross correlated;
3. Differentiating the signals to reduce volatility.

The correlation between two instruments can be direct or reverse, in other words, positive or negative.

The strength of the correlation can be measured with an index, the correlation .
The correlation index is a value ranging from 0 to 1 when it comes to direct correlation, and 0 to -1 when it comes to negative correlation.

We talk about positive or direct correlation when two instruments move together and with the same direction.
If the index of a positive correlation is 0.8, or more commonly 80/100, or more, we are in the presence of a strong link between the two instruments. The more you go down to 0 and the correlation is weaker. Conversely, it is called inverse or negative correlation when two instruments move together but in opposite directions. If the correlation is -0.9 or -1, it was in the presence of a strong inverse correlation. Value above -0.5 indicates weak inverse correlation.

Consider a table with the correlations between the major cross currencies.
In this table the values \u200b\u200bare multiplied by 100, then the positive correlation between 0 and 100.

CURRENCY CORRELATIONS

vienne This table updated continuously at the site MATAF (Click on it).

examine one of the most famous relationships, that between EURUSD and USDCHF (Swiss Franc) is This is a very strong inverse correlation, in fact, the table indicates a value of -91.
Instead, AUDUSD and NzdUsd are positively correlated because they move almost together, in fact, the correlation means 83.

Please see below we will see how they are related to the various markets and some commodities:

Tool	Related to:	Reason ...
countries worldwide	respective Currency	When markets go down, the weakness is followed by that of the currency.
Gold	AUDUSD	Australia is one of the largest exporters of gold in the world, so it is obvious that the currency is linked to the raw material .
	Oil and €	obvious.
AUDUSD	NzdUsd	The two are related to cross geographical reasons.
NzdUsd	Gold	same reason Aud. New Zealand is also a major exporter of gold.
Usd	Gold	In markets Weak gold is seen as a safe haven.
USDCAD	Crude Oil	Canada is a major exporter of oil Crude Oil. If oil prices fall, USDCAD salt (each is sold).
USDJPY	Crude Oil	Due to the fact that all the oil is imported from Japan.
EURUSD	Crude Oil	direct correlation. Generally, when the Crude Oil is weak, even EURUSD loses ground and vice versa.
Eur	Commodities	Forte.
EURUSD	USDCHF	Inverse correlation to geographical reasons.
Markets Equity (S & P as a reference)	USDJPY and carry trades	When the stock gains, investors are willing to risk more. When investors want to risk buying more cross paying high interest, as AUDJPY.
S & P 500	Property Market	Amazing!
TBond USA (30 years)	German Bund	obvious.

Obviously, these correlations may be subject to change!

..... but is not over, not yet complete! Happy Trading ...