Posts Tagged ‘correlation arbitrage’
Correlation trading on FX
Correlation trading is based on few simple ideas:
- Correlations are changing with time
- Correlations of pairs of 3 currencies are bounded by strict equation
- Correlation is bound in the interval
![[-1, 1]](https://s0.wp.com/latex.php?latex=%5B-1%2C+1%5D&bg=ffffff&fg=1c1c1c&s=0 "[-1, 1]")
Therefore, one may try to “buy correlation” at -1 and to “sell it” at +1.
