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Tutorial 171 | Correlation indicator for when bars ‘missing’ from Data2

T171

Tutorial 171 demonstrates how to create a correlation indicator for data pairs where one of the data pairs has ‘missing bars.’ For example, for symbol 1 (data1) trading might have occurred on every bar during the trading session. Symbol 2 might be more thinly traded and hence it doesn’t have trading activity on every bar.

The correlation coefficient is a number between -1 and 1, which measures the degree to which two data series are linearly related. A perfect linear relationship with positive slope gives a correlation coefficient of 1. If there is a perfect linear relationship with negative slope between the two data series, the correlation coefficient of -1. A correlation coefficient of 0 means that there is no linear relationship between the data series.

The normal correlation function works by counting back bars in both data series and checking if they are both going up or both going down. The problem is that, because some bars are missing in one of the data series the program is comparing bars with potentially different time signatures.

For example, using the symbol A as data1 and AADI as data2 the following data sample was printed using the following routine:

If LastBarOnChart then 
Begin
For Value3 = 0 to Length - 1
Begin
Print( Value3, " Time 1 ", ( T Data1 )[Value3], " Time 2 ", ( T Data2 )[Value3] );
End;
End;

0.00 Time 1 1020.00 Time 2 1020.00
1.00 Time 1 1015.00 Time 2 1010.00
2.00 Time 1 1010.00 Time 2 1000.00
3.00 Time 1 1005.00 Time 2 955.00
4.00 Time 1 1000.00 Time 2 950.00
5.00 Time 1 955.00 Time 2 945.00
6.00 Time 1 950.00 Time 2 940.00
7.00 Time 1 945.00 Time 2 935.00
8.00 Time 1 940.00 Time 2 1600.00
9.00 Time 1 935.00 Time 2 1555.00
10.00 Time 1 1600.00 Time 2 1550.00
11.00 Time 1 1555.00 Time 2 1535.00
12.00 Time 1 1550.00 Time 2 1530.00
13.00 Time 1 1545.00 Time 2 1525.00

You will see that the bars would get out of sync very quickly because, for example, we would compare the increase or decrease in value of the 1015 bar on data1 with the increase or decrease in value of the 1020 bar on data2.

In another example the stock with 'missing' bars is used as Data1.
In another example the stock with ‘missing’ bars is used as Data1.

Tutorial 171 analyzes the data to create two arrays. Data1 bars that do not have a corresponding Data2 bar are excluded from the array, and vice versa. The standard CorrelationArray function then processes the two arrays to calculate the correlation.

Tutorial 171 can be used with TradeStation or MultiCharts. It is designed for minute bars and for the same interval to be used for both data1 and data2. Processing takes place at the end of each bar. In order to avoid potential infinite loop warnings, two of the counters have been limited to be a maximum of 100 (see video for further explantion)
The tutorial 171 indicator applied in MultiCharts
The tutorial 171 indicator applied in MultiCharts
See an video walk through of tutorial 171

Download the tutorial 171 TradeStation EasyLanguage indicators

If you want to save yourself some typing,  the tutorial 171 code is available for immediate download for $19.50 by clicking the following button. You can pay using PayPal or credit card. The program works with TradeStation 9.5 and 10. It is also compatible with MultiCharts.

The download also includes a function version of the program (_Tutorial171Function). An example of the usage of the function is:

Value10 = _Tutorial171Function( 14, T Data1, T Data2, D Data1, D Data2, C Data1, C Data2 );

The download consists of _Tutorial171 (the TradeStation EasyLanguage indicator developed in the tutorial) and the _Tutorial171Function function.

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