Risk & Money Management
Intermediate
Correlation
Statistical measure (−1 to +1) of how two instruments move together. +1 = perfect lockstep, −1 = perfect opposites, 0 = independent.
Definition
Correlation matters for position sizing — running 3 long trades on positively-correlated pairs is effectively one big trade, not three independent ones.
FX correlations shift over time, especially around major events. Check rolling correlations, not just long-term averages.
Example
EUR/USD and GBP/USD typically run +0.7 to +0.9 daily correlation. AUD/USD vs USD/JPY often inversely correlated through risk-on/risk-off flow.