# Questions tagged [correlation]

A measure of the degree of linear association between a pair of random variables.

253 questions
Filter by
Sorted by
Tagged with
70 views

### Simulating correlated Stock Prices python

has anyone tried simulating correlated stock prices via a geometric Brownian motion? I have done it in python but I have no idea if my code is correct since I can't compare it to anything. I would ...
63 views

### Two commodities which are normal distributed and perfectly correlated

The daily price change in commodity 1 is distributed $N(0,0.15^2)$ and the daily price change in commodity 2 is distributed $N(0,0.3^2)$. The two commodities are 100% correlated. 1) Does the relative ...
39 views

### Sharpe ratio of strategy exploiting correlations that vary by time interval

The Epps effect "is the phenomenon that the empirical correlation between the returns of two different stocks decreases with the length of the interval for which the price changes are measured" (...
40 views

### Creating a matrix of average correlations for sub-industry from individual stock correlation matrix

I am having trouble trying to figure out how to do this in Python. I have created it in Excel, but I would like to automate this for any sector or grouping of sub-industries. I first start with ...
91 views

37 views

### Can you derive fx correlations given the historic correlations of base pairs

Say for USDJPY and GBPUSD, I have the historic data and calc the volatility and correlation between these pairs. Because GBPJPY = GBPUSD x USDJPY. Can I calculate the correlation for GBPJPY directly ...
45 views

### Analyse correlation between LIBOR (quote in yield) and MSCI AC World (in dollars)

How would you analyse the correlation between LIBOR and MXWD? My initial intention was to get the log return of MXWD and take the opposite of the log return of the LIBOR yield (because when yield ...
30 views

### Tools related to Granger Causality

I would like to know if there are some tools that can measure that one time series is "faster" than the second one. I talk about really similar time series related to high frequency trading (hundreds ...
47 views

### serial correlation and CUSUM results

I have the following CUSUM test resulted from autoregressive distributed lag models (ARDL). Does the CUSUM results show that the model is stable? I am a bit confused because the red line in CUSUM ...
133 views

### Find the brownian motion associated to a linear combination of dependant brownian motions

I have $N$ correlated standard one-dimensional Brownian motions $W_1,\ldots,W_N$ with correlation matrix $\rho$ and I consider the process $Z_t \equiv \sum_{i=1}^N \mu_i (t) W_t$ where the $\mu_i$ are ...
320 views

### How to calculate implied correlation via observed market price (Margrabe option)

I can't seem to figure out how to do the following: compute the implied correlation $ρ_{imp}$ by using the observed market price $M_{quote}$ of a Margrabe option, and solving the non-linear equation ...
137 views

### Do correlated assets affect the price of a portfolio of derivatives?

I need to compute the value at risk of a given portfolio as an exercise for a class at university but I have trouble understanding how correlated assets affect the price of the portfolio. Could you ...
111 views

### Some basic examples for Granger causality

I have two time series, X and Y. The number of observations in each time series is the same and the variables would be price(logged). The goal of my research is to analyze if one variable X follows ...
38 views

### CFD broler spread as indicator for stock market

Retail trader on stock market has very limited ability to accomodate huge amount of information, it leds me to idea of using behavioir of more informed players - CFD brokers - spread of their CFD ...
37 views

### CDF&density of stock price modeled by standard brownian motion

Assume that the price of the stock follows the model $S(t) = S(0) exp ( mt − ((σ^2)/2 ) t + σW(t) )$ , (1) where W(t) is a standard Brownian motion; σ > 0, S(0) > 0, m are some constants. Derive the ...
80 views

### Do you have any examples of 2 assets that are non linearly correlated? And any models that calculate portfolio risk based on non-linear correlation?

Do you have any examples of 2 assets that are non linearly correlated? And any models that calculate portfolio risk based on non-linear correlation?