SeasonAlgo Forum

Dear all ,

after bild a spread I try to analyze the seasonal correlation clicking on "seasonal".

In the page's bottom I get a list of years with the % of correlation and the $ profit/lost x year.

Could you please explane to me how to correctly interpret this data (% correlation) ?

Tks for your help

Ciccio2012

Hi Ciccio

I suppose you know what correlation is (1 or 100% - two data sets move exactly same, 0 - no dependence, -1 - inverse move). The idea in case of Seasonal bottom table and chart is to find years in history which behaved similarly as current year. So it's up to you, how significant correlation you want to see, default and most used is probably at least 80%. So all years which have correlation higher than 80% are highlighted by bold in table. They are also used to calculated pattern (purple line in bottom chart). So correlation can be used as additional trading decision to confirm or avoid the trade. So for example if you will see three years which have >80% and their pattern is in opposite direction of seasonal pattern, then you should be more careful or avoid the trade (e.g. fundamental conditions against seasonality can be same in current year). Some traders use these correlations, some not. Btw, read the help, there is everything explained.

Please let me know, if anything is not clear.

Roman