Correlation measures how closely two currency pairs move together. It is expressed as a coefficient between −1 and +1.
| Coefficient | Meaning |
|---|---|
| +0.8 to +1.0 | Strong positive: the pairs usually move in the same direction |
| +0.4 to +0.8 | Moderate positive |
| −0.4 to +0.4 | Weak or no reliable relationship |
| −0.4 to −0.8 | Moderate negative |
| −0.8 to −1.0 | Strong negative: the pairs usually move in opposite directions |
Why pairs are correlated
Pairs that share a currency are often linked. EUR/USD and GBP/USD both have the US dollar as their quote currency, so a broad dollar move pushes both the same way, giving a strong positive correlation. EUR/USD and USD/CHF have the dollar on opposite sides, so they tend to show a strong negative correlation.
Economic links matter too. The Australian and New Zealand dollars are both commodity- and China-sensitive, so AUD/USD and NZD/USD tend to move closely together.
How we calculate it
Each of our market pages shows a correlation table calculated from daily percentage returns over the last 90 days and the last year. Using returns rather than raw prices avoids the false correlations you get when two unrelated prices simply trend over the same period. See for example EUR/USD correlations or AUD/USD correlations.
Correlation changes over time
Correlation is not fixed. Central bank divergence, a risk-off shock or a country-specific event can break a relationship that held for months. That is why we show both a 90-day and a one-year figure. If they differ a lot, the relationship is shifting.
Using correlation in practice
- Avoid doubling up. Buying EUR/USD and GBP/USD together is close to one larger dollar-short trade. If both stop out, you lose twice.
- Avoid hedging by accident. Buying EUR/USD and buying USD/CHF can largely cancel each other out while you pay two spreads.
- Confirm a move. If EUR/USD breaks out but its highly correlated partners don’t follow, the move may lack broad dollar participation.
- Diversify on purpose. If you want independent trades, pick pairs with low correlation.
Correlation is one part of risk management: count your exposure to each currency, not just the number of open trades.