Feb

17

One of the common caveats in looking at correlations and analogs is that the correlation should be based on price changes rather than price levels. Using levels leads to spurious high correlations in both directions.

My concern is that using charts of price levels is essentially the same thing as calculating a correlation based on levels. It will lead to spurious conclusions.


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  1. Ed on February 18, 2014 10:08 am

    I am not sure what is meant by price levels. Does this mean visually inspecting a chart for similar turning points?

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