Abstract
This paper examines the dynamic of prices for different exchange assets in relation to the dynamics of other exchange instruments. The analysis shows that in certain periods there exists a strong connection between the exchange assets(direct or indirect) but it is rather unstable. The understanding of such dependencies allows to predict the market price changes. The coefficient of correlation can act as a measure of convergence or divergence of two “equal” assets. For example, a strong positive correlation between the two exchange assets lead to conclusion that in the case of a big movement in one asset we can wait for equivalent changes in other exchange asset.
Highlights
Correlation analysis as an instrument of markets interactionDespite the fact that many books were written about the exchange prices forecasting, some unsolved problems still remain
This paper examines the dynamic of prices for different exchange assets in relation to other exchange instruments
The analysis shows that in certain periods of time there exists a strong connection between exchange instruments but it is rather unstable
Summary
Despite the fact that many books were written about the exchange prices forecasting, some unsolved problems still remain. The prediction of exchange assets prices refers to two areas of scientific activity: technical analysis and fundamental analysis. Since technical analysis is dealing only with “material” aspects (last prices) of the exchange asset, the impact of other factors is completely ignored or given to the fundamental analysis, which is “responsible” for economic, political, force-majeure and other factors. The charts are almost identical, though the comparison of the same exchange the exchange instruments we analyzed are very dif- instruments, in the year of 2005 gives a completely ferent – currency pair and the commodity asset – oil. As an analysis tool we will use the pair correlation analysis, because it is better and more objective than a simple comparison of two charts of instruments, and allows to appraise in figures this “focus” of the market, figuratively speaking – the force of market’s concentration on something
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