1. Forex And Using Information About Correlation Between
Currencies
For investors in forex, attempting to overcome the riskiness of the investment requires extensive
study of every aspect of a forex transaction. Some tips used by forex investors include data about the
correlation between different currencies.
Currency correlations in forex are used to help investors choose forex pairs. Once an investor
chooses currency pairs that he or she is interested in, information about correlating currencies can
help determine additional pairs to acquire.
Correlating currencies are measured positively or negatively compared to other currency pairs in
amounts ranging from a positive one to a negative one. A positive one means that 100 percent of the
time the currency pair follows the other currency pair. A negative one means that one hundred
percent of the time the currency pair goes down when the other pair goes up.
Currency correlations charts indicate which currency pairs tend to move in the same direction. These
charts are widely available without the need to open an account so that anyone can have access to
the information about how two currency pairs compare.
Buy using currency correlations charts, you can also determine which currency pairs move in the
opposite direction of other currency pairs. These numbers are represented in negative numbers.
How investors use the correlating currencies varies on their level of expertise. Some investors choose
to invest in currencies that move the same way so that if they make money on one currency pair,
they'll make money on other currency pairs.
One reason such investors might choose more than one currency pair rather than simply investing in
the movement of one is that there might be different spreads assigned to the currency pairs which
would save them money if they used a correlating currency in addition to the more common currency
they choose. The spread is the amount of money that represents the difference in the money an

2. investor can receive for selling his position at any given time versus buying his position and is the
money that goes to the forex dealer.
Another use of correlating currency pairs involves the fact that perfect correlation is rare. Since
currency changes of small amounts can represent losses or gains for investors, an investor might
choose two positively correlating currency pairs, where both pairs tend to go up at the same time but
where specific events that might impact one currency pair would protect assets in the second
currency pair.
Currencies are often sensitive to current events in a specific country. Using correlating currency pairs,
investors try to minimize the impact news in a specific country will have on their investment. For
instance, if two currency pairs tend to rise at the same time so that they have positive correlation,
then a news event which suddenly impacts one currency will not necessarily risk assets invested in
the second correlating currency that is not affected by the news.
Investors might consider investing in currency pairs with negative correlations in order to diversify.
Again, there are other factors to consider but generally this philosophy would be one where investors
hope that even if one currency pair goes down their negatively correlating pair of currency will help
minimize their losses.
The use of currency pairs and their correlating pairs can help investors see the relationship of how
different currencies compare to one another. Use the tips above to see how correlating currency
charts are used by investors to try to minimize the great risks involved in forex trading.
Click here for more information