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# Correlation between currencies - FOREX trading

I have started to trade FOREX in a small way.

I was looking at the following link http://www.investopedia.com/articles/forex/05/051905.asp#axzz1fzpk1etc and was wondering if there is a way I can somehow analyse the correlation between currency pairs e.g. GBP/USD and EUR/USD?  Can I get the data for this easily.

I want to understand if by looking at the performance of the EUR/USD pair, I can tell whether on the balance of probabilities the GBP/USD or GBP/EUR will rise.
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abdb469
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2 Solutions

Commented:
If currency correlations followed a statistical distribution, then I'd be rich.
They may rise and fall together, but the rise of one is not going to be an easy way to predict the rise or fall of another.

If your goal is prediction, then you are much better off reading the news then trying to use math and statistics. If you just want to analyze past history to see how countries are intertwined, then mapping those correlations over time could help.
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Commented:
the data you need:

but there is no magic statistic trick that will tell you how the currencies will fluctuate...
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Author Commented:
True, but I would just like to see how one correlates against another.  How would I do that mathematically?

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Commented:
Install the add-in Data Analysis Tookpak for Excel and use the correlation method on the range of data you select.

http://technet.microsoft.com/en-us/magazine/ff969363.aspx

(or are you asking for the mathematical procedure on paper? )
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Commented:
I would just like to see how one correlates against another
That's exactly what those coefficients in that link you posted do already. The closer it is to 0, the less they are correlated (-1 is correlated, just inversely).

If you look at the history of the correlation, that might give more info. They explain the math somewhat in your article. Is there a part you would like some clarification on?
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Author Commented:
sorry will look at this more closely during this holiday season.
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