Rolling Correlations
Posted: Wed Oct 03, 2012 4:40 pm
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.
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.