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Rolling Correlations

Posted: Wed Oct 03, 2012 4:40 pm
by sunyata
Have been researching correlations and how they change over time. Took soybean and soybean oil price data from 2000 - present and calculated rolling correlations for 40 days, 120 days, and 1 year. The resultant graphs are attached. The 40-day correlations are very erratic as you see and longer calculation periods smooth the results, just as with a moving average. Given the small sample size, the margin of error on the 40-day correlations is plus-minus 13%, although they are statistically significant.

I am newbie so I do not know at this point what calculation period is most useful for trading. I thought I'd share in case anyone was interested and to generate dialogue.

Posted: Wed Oct 03, 2012 6:43 pm
by LeviF
Looking at correlations on a weekly basis may help to smooth out some of your spikes.

Posted: Wed Oct 03, 2012 7:35 pm
by sunyata
Thanks for the tip. I'll look into that.

Posted: Thu Oct 04, 2012 6:55 am
by babelproofreader
You might also find the ideas here useful.