Free Trading School · Level 11: Sentiment, Intermarket and Divergence
Intermarket correlations
Markets are connected. A move in one often shows up in another. Correlation measures how closely two markets move together, from +1 (always together) to −1 (always opposite).
| Relationship | Typical correlation | Why |
|---|---|---|
| Oil and USD/CAD | Negative | Higher oil supports the Canadian dollar, so USD/CAD tends to fall |
| Gold and the US dollar | Usually negative | Gold is priced in dollars |
| EUR/USD and GBP/USD | Strongly positive | Both are priced against the dollar |
| US bond yields and USD/JPY | Positive | Higher US yields attract money into dollars |
| Stocks and VIX | Strongly negative | Falling stocks raise fear |
Correlations matter for risk. Buying EUR/USD and GBP/USD at the same time is close to one big bet against the US dollar, not two separate trades.
Count correlated positions as one when you add up your risk.
Quick answers
Markets are connected. A move in one often shows up in another. Correlation measures how closely two markets move together, from +1 (always together) to −1 (always opposite).
Count correlated positions as one when you add up your risk.
Falls. Higher oil tends to support the Canadian dollar, so USD/CAD falls.
Next lesson: The carry trade and swaps