What it does
The Correlation Coefficient measures how closely two instruments move together over a lookback window, using the Pearson formula: the covariance of the two price series divided by the product of their standard deviations. Values range from +1 (moving in lockstep) through 0 (no linear relationship) to -1 (moving exactly opposite). It is plotted as an oscillating line as the rolling window advances.
How to add it
Click Indicators (ƒx) in the header.
Search “Correlation Coefficient” and click the result.
Hover its legend row and click the gear to open settings.
How traders use it
- Readings above +0.7 indicate a strong positive relationship and below -0.7 a strong inverse one; between -0.3 and +0.3 the pair is effectively uncorrelated.
- Use it for diversification checks: positions in instruments correlated above +0.7 behave like one larger position, concentrating risk.
- Pairs and relative-value traders watch for a historically high correlation breaking down, which can flag a temporary divergence to trade or a structural change to respect.
- Confirm hedges: a hedge only works while correlation with the hedged asset stays strongly negative, so monitor the rolling value rather than assuming it.
Inputs
| Input | Type | Default | Range / Options |
|---|---|---|---|
| Symbol | symbol | — | — |
| Length | number | 25 | 2–500 |
Plots & styling
| Plot | Style | Default color |
|---|---|---|
| Correlation | area | #2196f3 |
Every plot's color, line width and visibility can be changed on the Style tab. Precision (default 2 decimals), price-scale labels and status-line values are configurable at the bottom of the Style tab.
Reference levels
| Level | Value |
|---|---|
| 1 | 1 |
| 0 | 0 |
| -1 | -1 |
Level values, colors and line styles are editable in settings.
Tips
- Resize the pane by dragging its divider; collapse it from the legend row when you need the space back.
- Use Add to favorites in the legend menu; starred studies surface at the top of the picker.
- Reference levels (where the study has them) are editable — tune them to the instrument you're trading.
- This indicator accepts another symbol — leave it empty to use the chart's own symbol.
Watch out for
- Correlation is unstable and regime-dependent; relationships that held for months can invert during stress exactly when you rely on them.
- It measures only linear co-movement and implies nothing about causation or about which instrument leads.