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Correlation types – possible feature request

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mikeyc

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5 years ago #114886

Hi Mark and team,

 

Looking at the types of correlation available:

  • Profit/Loss – a sum of profit or loss for all the trades closed at a given period, for example day
  • Number of closed positions – a number of positions that were closed in every period, it distinguishes between long and short trades, it adds +1 for long and -1 for short trade to the final count for the period.
  • Number of closed trades – a number of trades that were closed in every period. It doesn’t consider whether the position is long or short, it counts both as a new trade.
  • Number of open positions – a number of positions that were open in every period, it distinguishes between long and short trades, it adds +1 for long and -1 for short trade to the final count for the period. 
  • Number of open trades – a number of trades that were open in every period. It doesn’t consider whether the position is long or short, it counts both as a new trade. 
  • – See more at: https://strategyquant.com/doc/article/portfolio-correlation-explained.html#sthash.0CTjdqsq.dpuf

 

It occurred to me what I really want is number of overlapping trades in the period.  So in one hour there might be 5 trades, and they could be opened and closed without overlapping, this is zero correlation.  If 5 trades overlap and they are all long that’s +5, if 5 trades overlap and they are all short, that’s -5.  If trades partially overlap, say 30% of the trade overlaps by duration in the period, then the output would be 0.3 or -0.3 depending on long or short. 

 

If 2 trades totally overlap that are long, and two trades overlap that are short and one does not overlap, that would be zero also.

 

This is really what I think about when I think of correlation. I don’t think your “Number of open trades/positions” works like my description, since it relates to positions that were opened or closed, not that are already open in the period?

 

Am I correct in thinking that my correlation is not the same?

 

Regards,

 

Mike

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