how to calculate currency correlation?

All,

Off the top of your heads, can anyone point out how to calculate the correlation of 2 currency pairs? I'd google the issue, but for some reason, I can't quite seem to get my calculations correct.

So, if anyone out there could be willing to point me in the right direction, I'd definitely appreciate it.

Mind you, I don't need actual correlations, I need the mathematical formula for calculating correlations between two datasets. Thanks.

This is what is on FXLabs i have NO IDEA if this is right.

How Correlation Coefficients are Calculated

The correlation coefficient for two exchange rates is calculated using the following formula:
http://fxtrade.oanda.com/currencyCor...nEquation1.png Where:
http://fxtrade.oanda.com/currencyCor...nEquation2.png


http://fxlabs.oanda.com/cgi/fxlabs.pl?id=4

mb, thanks...this looks similar...however, I'm assuming the X-bar (X with the Bar over it's head) is the arithmetic mean (average) of X for the period n, right???

Anyone?

yes that is correct. I think you should either search for Isotonic's threads on correlation or PM him. He is def the one too look up for this. Lemme see if I can find those threads cause I believe he explains the formula he uses(and I believe it was this one, and he compared his numbers to Oandas)

Mike

http://www.forexfactory.com/showthre...ht=correlation

I am not sure if he discusses formulas he used in this thread though.