NZD/JPY Correlations

I calculated these from the past 365 days of data. I'll post more exotic correlations if there is an interest. Enjoy


NZY/JPY

NZD/USD +.96
GBP/NZD -.73
USD/JPY +.69
EUR/USD +.67
USD/CAD +.67
AUD/JPY +.66
EUR/AUD -.63
EUR/GBP -.56
GBP/CHF +.40
USD/CHF +.35
AUD/USD +.29
GBP/JPY +.27
EUR/CAD +.21
CHF/JPY +.15
EUR/JPY +.15
EUR/CHF +.13
GBP/USD -.01

How about NZDAUD ???

I'll do that one next. Either later today or tomorrow.

Did you want all the nzd/aud corrs or just vs the nzd/jpy?

Thanks..actually..I thought NZDJPY and NZDAUD are co-relation pairs for hedging and carry trade..but after a weeks of testing..i found out it is not so.

Im not sure how to trade with NZDJPY and NZDUSD for carry trade..It will be very interesting though.

Im right now on GBPJPY pair..any idea which currency it co-relates the best.

Thanks.

NZD/AUD is +.87

Thanks,

It has a positive co-relation bad for hedge and carry trade.

I just went over mataf net site and loaded it on to excel and found that, exotic currencies have a very good oppourtunity for carry trade and they can be hedged well..only problem very high spread and it would take over a month or more to cover the cost by interest.

IF we could combine these currencies, we could set up a nice carry basket.

Any ideas..Thanks

You could cover the cost of the spread in about 7 days with most pairs. I care much less about the spread, as I want to hold these trades for weeks or months to accumulate the optimum level of interest before reinvesting it. I created a graphing formula to compare pairs with varying levels of interest or spread. It will let you know what pair will earn the most over a given period of time and when it is best to close and re-enter. If the correlation is positive, just sell one of the pairs. Correlation is much more important then interst, since if the pair deviates largerly it will kill any interest developed. I'm looking for pairs of .90 or better and looking to bank off the interest alone.

Fascinating stuff here. I've been trying to figure out how this can become a system for a while now, without any luck. Correct me if I'm wrong, but correlation just refers to direction of movement? Or does it account for the relative magnitude of the moves as well? If not, how is magnitude accounted for? In all of the test hedges I've set up I can't seem to match the +-. I realize the correlation is not 100%, but with pairs like EURUSD and USDCHF I would have thought I could get closer than I have. I must be missing something?

Thanks for starting this thread by the way.

No problem. Thanks for the input. Hope this sheds some insight -

Investopedia Says: Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities is said to have no correlation, it is completely random. If one security moves up or down there is as good a chance that the other will move either up or down, the way in which they move is totally random.

Sort of convaluded, but I believe it's mainly directional. The way that I've been successful the most is taking both the daily ranges into account, along with the value of each pip in terms of dollars. If you get a ratio of these and buy the appropriate number of lots to compensate you are cooking.

Yes..Exotic currencies tend to be more stable than the majors and are consistant in being at above 90 mark. Guess large institutions and hedge funds have a role to play

Im thinking of going with few exotic currencies that co-relate best with micro-account and if it does well..'cos if we look in papers it looks all well..but when you go real..don't know others factors come in and we get different date..so i would test with real money but with a micro account and see how i can leverage it in the long run.

Any idea which broker may be best suitable for it. o anda does it but it does not have the whole lot of exotic currencies and the leverage is quite low.

It would be dream if some broker offers 1:500 leverage and micro-account for these exotic currencies

I'm looking at a few brokers right now, but the best one may depend on what pairs you're looking to trade. I would like to get a whole group of hedge carry traders together and head to one broker. That way, if they decide to do anything silly they would be threatening the whole group and not just one person. Strength in numbers!

I checked Oand a , North fi nance, fx sol all allow carry trade. i have asked them clearly and they seem to not have any problem. only problem is all have somethings that others do not have.

like oand a has all the currency and the lots are point based..but the leverage is very low at 1:50 on the other hand NF has every currency on the planet and have the leverage of 1:500 but they do not offer point based lots or micro accounts..FX SOl has high leverage of 1:400 and point based micro lots too but they do not have exotic currencies

if we could find any broker that has everything perfect for carry trade it would be great..else we have to select with these and compromise

Wow, I didn't know you could get 500:1 now. You need to be extra careful with that. Fxsol BLOWS for interest, so they're out of the picture. 50:1 is no good, so that kills FXDD and I guess Oanda too. I will look into this North Finance. Never heard of them. UGM (United Global Markets) has great rates, micros, most exotics, and 400:1 I believe. NF would still work with minis if you had I large enough balance to trade the right ratios.

Yeah..NF is good if you have high deposit to play with..they only have mini account and standard account..but they have all the currencies to trade.

Im going though many brokers but they don't seem to fit exactly with what we want..so i guess we need to compromise.

I would imagine that they can't offer 500:1 indefinitely. Do you know at what account size they cut off that much leverage. I would also want to look into there history because the higher the leverage a broker offers the more likely they are a bucketshop. 500:1 is great for what we're doing, but an absolutely ridiculous amount of leverage.

Hi,

North Finance is great, they even accept eGold as method of funding...only downside if you're into swap trading is that they are useless in the sense that there is a HUGE spread difference between what they pay and what they charge, check out, like keeping 100K USDJPY overnight they will pay $5.15 if you are long, if you are short they hit you $10.77 almost double

Once more, for normal trading they seem to be really great and I like the eGold option. I am myself investingating broker options for swap plays.

Best wishes,

Mecer

That's a horrible swap for the JPY. UGM pays $13.70 for long positions.

North Finance is around since 5-6 years. e-gold option is good and because of that i used them. I think there is no set account size for them to offer 1:500 leverage. You can ask from chat and they would increase your leverage to 1:500

They have a good reputation amoung gulf countries as they offer interest free account to muslim traders and high leverage means they can play a lot with their oil money

I have searched almost all brokers, they seem to fundamentally negate all hedge and swaps..they don't want to give you any money but take as much as possible.

All brokers will have the interest losing side larger then the interest gaining side. What you can do is hedge pairs with a high correlation and have the pair that gains interest against a pair that loses less and net the difference.