Correlation with the index
How closely the stock's daily moves line up with the index's, from −1 to +1.
Relative strength, cycles and structureBest on 6M, 1Y, 3YAlso called rolling correlation
What it shows
Correlation measures how much two series move together. +1 means they move exactly together. 0 means no link. −1 means they move opposite.
We compute it over the last 60 days of daily returns.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Daily returns of the stock and the index.
- Compute the Pearson correlation over 60 bars.
- Slide the window one bar at a time.
- Plot the line.
Starting values: Window 60 bars. These are proposed and will be tuned on real price data before launch.
How to read it
- The panel shows correlation.
- Near 1: moves with the index.
- Near 0: moves on its own.
Status labels you may see
| Label | What it means |
|---|---|
| High | Above 0.7. |
| Moderate | 0.3 to 0.7. |
| Low | Below 0.3. |
What cancels it
Nothing cancels it.
What traders check next
- Beta.
- How it changes in sell-offs.
- Sector.
Limits
- Changes over time.
- Crises raise correlations.
- Short windows are noisy.
Try it in forecastviz
- Open any ticker and choose Relative strength, cycles and structure → Correlation with the index in the left menu.
- Switch between 6M, 1Y, 3Y to see how the picture changes.
- Compare with Beta and Relative strength ratio on the same chart.
Questions
Does high correlation mean the same size of moves?
No. Beta gives the size.
Why check it?
To see whether the stock follows the market.
Related trends
Further reading
- O'Neil, How to Make Money in Stocks
- Levy, The Relative Strength Concept of Common Stock Forecasting
- Pring, Technical Analysis Explained
- Frost and Prechter, Elliott Wave Principle
- Hank Pruden, The Three Skills of Top Trading
- Hirsch, Stock Trader's Almanac
Educational only. Not financial advice, and not a price forecast. Charts are drawn by code from past price data, which may be delayed.