DAX v EURO correlation

Correlation is about how certain things are related. Some instruments are inversely correlated i.e. if price goes up on one, then price tends to go down on another. Positive correlation  means they move in the same direction.

It is almost never the case that there is perfect correlation between two instruments. Interestingly the DAX (GER30) which is the German stock market index, has a broad inverse correlation with the EURUSD currency pair, especially on higher time frames. But there are times when the two move in the same direction for short periods, like a few days or weeks.

In practical terms if one is making estimates on price direction, then it is useful to check a correlation to see under what’s happening. This is a good idea because the usual methods of making risk assessments may fail.

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