Correlation Analysis vs Seasonal Analysis

Wednesday, 04 November 2015 11:51 Mary Hatfield
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Correlation Analysis and Seasonal Analysis are different.

Seasonal analysis looks only at the last 15 years to find repetitive movement --- the "norm," if you will.  The seasonal pattern is static and has no input whatsoever from current market behavior.

Correlation anlysis, in contrast, first examines current market behavior and then looks back over all previous years (in the database) to find any whose market behavior correlates at a rate of at least 84%.  Any and all that do so then compose a correlation pattern --- the theory being that prior years which behaved similarly to this one may have been responding to similar supply/demand fundamentals and how those years resolved those issues may suggest how this year/s market will resolve them via price going forward.  This correlation pattern is dynamic in that it can change --- going forward some of those prior years may drop and/or others be included.

Seasonal analysis is our standard because we believe traders are better informed knowing what the market itself has most often tended to do.  But Correlation analysis can help identify unusual behavior.

Last Updated on Wednesday, 04 November 2015 11:54