Correlation Calculator
Calculate the Pearson correlation coefficient between any two assets. Find out if your positions are doubling up on the same risk.
Free — no signup, no ads, instant results
Inputs
Enter closing prices for the same time period. Minimum 5 data points recommended.
Results
Correlation Coefficient (r)
0.9952
R-Squared
0.9904
Direction
Positive
Strength
Very Strong
Based on 7 data points. Asset A and Asset B are strongly positively correlated.
Who Is This For?
This calculator is for traders and portfolio managers who want to avoid doubling risk on correlated positions. It is especially useful for forex traders checking currency pair correlations and anyone diversifying across multiple assets to ensure genuine portfolio diversification.
When to Use This Calculator
- Before opening multiple positions to check if they move together
- When building a diversified portfolio across asset classes
- When hedging with negatively correlated assets
- When investigating why multiple positions won or lost simultaneously
Formula
The Pearson correlation coefficient (r) measures the linear relationship between two data sets. It ranges from -1 (perfect inverse) to +1 (perfect positive).
R-squared (r²) tells you what percentage of one asset's price movement is explained by the other. An R² of 0.64 means 64% of the variance in Asset B can be explained by Asset A.
Worked Example
Scenario: Compare EUR/USD and GBP/USD over 5 closing prices.
Step 1: EUR/USD closes: 1.0850, 1.0870, 1.0830, 1.0900, 1.0920.
Step 2: GBP/USD closes: 1.2650, 1.2680, 1.2640, 1.2710, 1.2740.
Step 3: Pearson correlation = 0.98 (very strong positive).
Result: Going long both EUR/USD and GBP/USD is essentially doubling your USD-short exposure. Treat them as a single risk unit when sizing positions.
Assumptions & Edge Cases
- Uses Pearson correlation which measures linear relationships only — non-linear dependencies will not be captured
- Correlation changes over time — use recent data (30-90 days) for the most relevant results
- Minimum 5 data points needed, but 30+ is recommended for reliable results
- Correlation does not imply causation — two assets may be correlated due to a shared third factor
- Both data series must cover the same time period for a valid comparison
Frequently Asked Questions
Correlation measures how two assets move in relation to each other, on a scale from -1 to +1. A correlation of +1 means they move perfectly together, -1 means they move in exactly opposite directions, and 0 means no relationship. Traders use correlation to diversify and avoid doubling up on risk.
EUR/USD and GBP/USD are typically strongly positively correlated (0.80+). EUR/USD and USD/CHF are strongly negatively correlated (-0.90+). AUD/USD and NZD/USD are also highly correlated. Trading correlated pairs simultaneously doubles your exposure to the same risk.
Avoid taking the same directional trade on highly correlated assets — it's essentially doubling your position size. If EUR/USD and GBP/USD are 0.85 correlated, going long both is almost the same as doubling your EUR/USD position. Use negatively correlated assets for hedging.
Yes, correlations are dynamic and can shift significantly. Two assets that were strongly correlated during one market regime may decouple during another. Always use recent data (30-90 days) and re-check correlations regularly.