Market analysis
Whether two open positions are really one position wearing two tickers.
Whether two open positions are really one position wearing two tickers. The page states the equation, the units it expects and the rounding it applies, so the result can be reproduced by hand.
A calculator gives you a number. This one feeds the next: account to risk, risk to position size, position size to the trade, and the trade to expectancy, drawdown and risk of ruin.
See the performance tools →At ρ = 1 this collapses to a + b, the naive sum. At ρ = −1 it collapses to |a − b|. Everything real sits between.
Two 1% positions with a correlation of 0.85:
Eight hundredths of a percentage point of diversification. At this correlation the two positions are effectively one.
Above about 0.7 the diversification benefit is small enough to ignore. Size them as a single position.
Any that share a currency, particularly against the dollar. EURUSD and GBPUSD typically run above 0.8, so long positions in both are one dollar-short trade.
Compute it on the returns, not the prices, over the horizon you actually hold for. A correlation measured on daily returns says little about a position held for an hour.
A calculator answers one question and raises the next. These are the ones this figure feeds into.
The maximum you should lose on one trade, before anything else about the trade is decided.
Exposure relative to equity, and why an affordable margin can still be reckless risk.
Turn an account balance, a risk percentage and a stop distance into a size in lots, shares or contracts.
Correlation Calculator · rounding shown to the precision displayed