To analyze the correlation between currency pairs, compare their price movements over time using correlation tools or charts. A positive correlation means both currency pairs move in the same direction, while a negative correlation means they move in opposite directions. Use correlation coefficients to understand how strong or weak the relationship is—this helps traders manage risk and plan strategies.

What Is Currency Pair Correlation?

Currency pair correlation shows how two forex pairs move in relation to each other. If both pairs tend to rise or fall together, they have a positive correlation. If one pair rises while the other falls, it’s a negative correlation. Understanding this helps traders avoid placing trades that might cancel each other out or double the risk.

How to Measure Currency Correlation?

You can measure currency correlation using a correlation coefficient ranging from +1 to -1. A value close to +1 means strong positive correlation, and -1 means strong negative correlation. You can find free tools or Excel templates online to calculate these values using historical price data of two currency pairs over a chosen time period.

Which Currency Pairs Are Usually Correlated?

Some common examples of correlated currency pairs are EUR/USD and GBP/USD (positive correlation), or USD/JPY and EUR/USD (negative correlation). This happens because certain currencies, like the Euro and Pound, are influenced by similar economic factors, while others move opposite due to different interest rates or trade relations.

How Can Traders Use Correlation in Strategy?

Traders use currency correlations to diversify or hedge their trades. For example, if two pairs have a strong positive correlation, traders avoid trading both to reduce risk. If a trader expects one currency pair to move in a certain direction, analyzing correlated pairs gives them more confirmation or alternative entry opportunities.

Does Correlation Stay the Same Over Time?

No, currency correlation can change due to interest rate shifts, economic policies, or global events. For example, a pair that showed strong positive correlation last year might behave differently now. That’s why traders need to check correlation regularly and not rely on outdated patterns.

Where Can You Track Currency Pair Correlation?

You can track correlation using platforms like TradingView, Myfxbook, or even Excel. These platforms provide real-time data and visual graphs that make it easy to spot relationships between pairs. Most trading apps also provide correlation matrices as part of their forex analytics tools.