Question 1

What does a correlation matrix tell a trader?

Accepted Answer

It shows whether the instruments you hold are really separate bets. A correlation of +1 means two symbols move together, −1 means they move opposite, and 0 means no reliable relationship. A watchlist where most pairs sit above +0.7 is effectively one trade repeated several times: a single adverse move hits every position at once, so the portfolio carries far more risk than the number of tickers suggests.

Question 2

How is the correlation calculated?

Accepted Answer

TraderAI uses the Pearson correlation of daily LOG RETURNS, not raw prices. Correlating price levels of two trending assets returns nearly 1.0 for almost any pair - both went up - which carries no information. Bars are matched by TIMESTAMP, never by position in the array: two instruments can have the same number of candles yet cover different calendar days, so a bar missing on one side is dropped rather than filled, and pairs with fewer than 30 overlapping bars are shown as “-” instead of a number.

Question 3

What counts as a high correlation?

Accepted Answer

Above +0.7 (or below −0.7) is conventionally treated as strong. Between +0.3 and +0.7 the relationship is real but partial, and between −0.3 and +0.3 there is no dependable link. A negative correlation is a genuine hedge: the two positions offset each other. Note that correlation is not stable - pairs that look independent in calm markets frequently converge toward +1 during a sell-off, which is exactly when diversification is supposed to help.

Question 4

How do I check whether my own portfolio is concentrated?

Accepted Answer

Open “My symbols”, import your Portfolio or Watchlist (or type up to 30 tickers), and the page reports the share of your capital that sits in a group whose every pair is correlated above your chosen threshold (0.8 by default) - for example “80% of your capital sits in 4 positions that all move together”. Tap any cell to see the pair’s rolling 30/60/90-day correlation, because a relationship that was loose last year can tighten sharply in a sell-off.

Correlation Matrix

How this is measured

Frequently asked questions

What does a correlation matrix tell a trader?

How is the correlation calculated?

What counts as a high correlation?

How do I check whether my own portfolio is concentrated?

Related tools

Correlation Matrix

How this is measured

Frequently asked questions

What does a correlation matrix tell a trader?

How is the correlation calculated?

What counts as a high correlation?

How do I check whether my own portfolio is concentrated?