This script plots the correlation for two symbols as an oscillator: A correlation of 1 means that both values move in the same direction together. A correlation of -1 means that both values are perfectly negative correlated.
Parameter: Length of the Correlation The two symbols you want to calculate the correlation for Barcolor: Defines whether Bar-coloring is set on. The Number of bars lookback for anomaly: Say both are normally positively correlated it is an anomaly when the correlation turns negative and vica-versa.
Alerts: You can also set an Alert when an anomaly is detected.(blue dots on oscillator)
This has many use-cases:
For example VVIX and VIX are normally positive correlated.
When this turns negative, this can mean that we are on a turning point: --> VVIX is rising while VIX is falling, risk of future Volatility is increasing (Top) --> VIX is rising while VVIX is falling, risk of future Volatility is decreasing (Bottom)
Another use-case is just checking the correlation of stocks in your portfolio to diversify.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publications is governed by House rules. Você pode favoritá-lo para usá-lo em um gráfico.
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