Correlation of time series - is there a better indicator?

Tosh5457 · Jun 26, 2012

Is correlation between 2 time-series a useful indicator? In currency pairs for example, sometimes the correlation between 2 pairs (e.g. EUR/USD and GBP/USD) for the past x days is strong, but it can weaken very fast. Should I just take the average over time and go with it, or is there a better indicator to measure a relation between 2 time-series?

viraltux · Jun 26, 2012

Tosh5457 said:

Is correlation between 2 time-series a useful indicator? In currency pairs for example, sometimes the correlation between 2 pairs (e.g. EUR/USD and GBP/USD) for the past x days is strong, but it can weaken very fast. Should I just take the average over time and go with it, or is there a better indicator to measure a relation between 2 time-series?

Hi Tosh

Usually a shift between series is also considered. This relationship between two time series is called Cross Correlation

This functionality is implemented in R in the function ccf

Correlation of time series - is there a better indicator?

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