Sector Correlation Matrix [LuxAlgo]

The Sector Correlation Matrix indicator provides a quantitative measure of the statistical relationship between a selected asset and a benchmark to help traders identify market synchronization and relative strength.

🔶 USAGE

This tool is particularly useful for relative strength analysis. For example, if a stock is "Decoupled" while the benchmark is crashing, it may indicate idiosyncratic strength. Conversely, traders can use "Strong Positive" states to confirm that a price move is part of a broader market trend rather than an isolated event.

The indicator categorizes market relationships into five distinct states based on the coefficient value:

• Strong Positive (> 0.7): High degree of synchronization; the assets move together closely.
• Moderate Positive (> 0.3): General tendency to move in the same direction.
• Decoupled / Neutral (-0.3 to 0.3): No significant linear relationship; the asset is moving independently.
• Moderate Negative (< -0.3): General tendency to move in opposite directions.
• Strong Negative (< -0.7): High degree of inverse synchronization.

🔶 DETAILS

The script utilizes the Pearson Correlation Coefficient to calculate the rolling correlation between the current chart's closing price and a user-defined benchmark (such as SPY, QQQ, or BTC). This statistical method measures the linear correlation between two sets of data, resulting in a value between -1 (perfect inverse correlation) and 1 (perfect positive correlation).

The visual output includes a dedicated pane with a correlation oscillator and an on-screen dashboard that provides real-time metrics, allowing for a quick assessment of the current market state without manually comparing multiple charts.

// Core Calculation Logic
correlationValue = ta.correlation(close, benchClose, corrLenInput)

🔶 SETTINGS

🔹 Logic Settings

• Benchmark Asset: The ticker symbol to compare the current asset against (e.g., SPY, QQQ, BTCUSDT).
• Correlation Length: The lookback period used to calculate the Pearson Correlation Coefficient.

🔹 Dashboard

• Show Dashboard: Enable or disable the on-screen information table.
• Position: Select the dashboard location (Top Right, Bottom Right, or Bottom Left).
• Size: Adjust the size of the dashboard text and cells (Tiny to Huge).