Equity/Carry Trade Correlation | Forex Factory

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Equity/Carry Trade Correlation

  • #1
  • First Post: Jun 14, 2008 11:22am Jun 14, 2008 11:22am
I have been interested in this correlation for quite a while.
Sometimes can be used as a great tool to trade the carry pairs.

I have posted some charts showing the relation between DJIA and S&P to GBP/JPY. Lately it seems like the correlation has broken down.

But I do believe I have found some interesting points to pursue and discuss.

Please take a look and analyze/comment.

Good trading to all.
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  • #2
  • Jun 15, 2008 11:25am Jun 15, 2008 11:25am
For Ovaforty
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  • #3
  • Jun 15, 2008 11:29am Jun 15, 2008 11:29am
For Ovaforty
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  • #4
  • Jun 15, 2008 11:42am Jun 15, 2008 11:42am
If the SP rallies from here we should see a nice up move in G/Y.

If risk aversion reenters the market the G/Y will more than likely experience a violent and very fast down move.

As you can see in the chart the G/Y has caught up to the SP and actually overshot the index.
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  • #5
  • Jun 17, 2008 10:33pm Jun 17, 2008 10:33pm
Update
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  • #6
  • Jun 17, 2008 11:51pm Jun 17, 2008 11:51pm
Quoting Rustyyy
I have been interested in this correlation for quite a while.
Sometimes can be used as a great tool to trade the carry pairs.

I have posted some charts showing the relation between DJIA and S&P to GBP/JPY. Lately it seems like the correlation has broken down.

But I do believe I have found some interesting points to pursue and discuss.

Please take a look and analyze/comment.

Good trading to all.
Nice work Rusty.

How close has the correlation been between the Dow (DJIA) and USD/JPY lately? I usually see U/J following the Dow around (especially during NY session), and thereby influencing G/J price movement. If G/J doesn't mimic U/J, it's because G/U is moving strongly the other direction and cancelling it out

Thanks,

Ron
  • #7
  • Jun 18, 2008 12:31am Jun 18, 2008 12:31am
Quoting Pips_Cruiser
Nice work Rusty.

How close has the correlation been between the Dow (DJIA) and USD/JPY lately? I usually see U/J following the Dow around (especially during NY session), and thereby influencing G/J price movement. If G/J doesn't mimic U/J, it's because G/U is moving strongly the other direction and cancelling it out

Thanks,

Ron
Usd/JPY has disconnected.
GBP/USD is still dancing.
When USD/JPY comes down to meet DJIA.
Watch out below !
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  • #8
  • Jun 18, 2008 11:51am Jun 18, 2008 11:51am
My experience with Carry Trades Is:

The carry trades will follow DIJA sometimes -- sometimes not. It seems like they correlate with one ecconomic indicator for a while, then another.

They are also somewhat seasonal, as you well know.

For a while they were working on the with the USD, but with the Dollar not nearly as strong in buy mode, they found the DIJA to stick to.

It's always going to be one thing or another -- because the carry trades are so popular.
  • #9
  • Jun 19, 2008 12:20am Jun 19, 2008 12:20am
Quoting Rustyyy
Usd/JPY has disconnected.
GBP/USD is still dancing.
When USD/JPY comes down to meet DJIA.
Watch out below !
Interresting thread rusty, good idea.

I have searched the internet for an online source
for Nasdaq vs. NYSE Volume Ratio. A daily timeframe would be nice,
but i found nothing. Any idea, where i might search ?

Thanks !
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  • #10
  • Jun 21, 2008 2:53pm Jun 21, 2008 2:53pm
Quoting Rustyyy
Usd/JPY has disconnected.
GBP/USD is still dancing.
When USD/JPY comes down to meet DJIA.
Watch out below !
Rusty - What data does the fourth chart depict? I don't understand the difference between it and the first chart, except they cover a slightly different period of time, and they look different. Thanks.
  • #11
  • Jun 23, 2008 2:07pm Jun 23, 2008 2:07pm
Quoting Pips_Cruiser
Rusty - What data does the fourth chart depict? I don't understand the difference between it and the first chart, except they cover a slightly different period of time, and they look different. Thanks.
No answer? Then I'll take it to be an illustration of "When USD/JPY comes down to meet DJIA. Watch out below!". If I'm wrong let me know . . .
  • #12
  • Jun 23, 2008 4:26pm Jun 23, 2008 4:26pm
all a matter of crossing stochachstics ?
Attached Image(s) (click to enlarge)
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  • #13
  • Jun 23, 2008 4:56pm Jun 23, 2008 4:56pm
Quoting Pips_Cruiser
No answer? Then I'll take it to be an illustration of "When USD/JPY comes down to meet DJIA. Watch out below!". If I'm wrong let me know . . .
Sorry for the delay my friend.
Yes the 4th chart was to show what happens when they meet. It is usually a sign of a large fall.
Hope you are doing well.
  • #14
  • Last Post: Jun 23, 2008 6:30pm Jun 23, 2008 6:30pm
there is one big reason for the correlation: during the Dow's session, all the major banks trade the JPY alongside the DJIA. this is because the theory is that Japan's market is going to try and copy the US market. if you open any JPY pair and place it alongside the dow you'll see pretty much the same thing.
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