Correlation matrix

How do you see which coins move together, pair by pair, as it was on each date? Inside request.pairs, left and right are the two coins' own closes, so a pair can correlate their returns rather than look at their ratio.

indicator("Correlation matrix")
array<string> m = request.universe(15, exclude_tags = "stablecoin")
int len = input.int(90, "Window, days", minval = 10)

// left and right: the row coin's and the column coin's own closes
matrix<float> rho = request.pairs(m, ta.correlation(
  ta.change(math.log(left)), ta.change(math.log(right)), len))
report.matrix("correlation " + str.tostring(len), m, rho)
// How crowded each coin is: its correlations summed
report.column("summed correlation", m, cs.row_sum(rho))
plot(array.size(m), "Members")

Run it from the Screener: choose it in the script picker, press Run, and open the Matrix section. request.pairs and report.* are AmenoScript additions, so the script is AmenoScript and runs leak-safe. Stablecoins are left out because their returns are close to zero every day, so their correlations would say nothing.

How it works

• ta.change(math.log(left)) is the row coin's daily log return, and the same with right for the column coin.
• ta.correlation(a, b, len) is their correlation over the last 90 days of the pair.
• Every pair keeps its own window. With warm at its default, true, a pair starts at the two coins' first shared price, so a coin that just joined the list arrives with its past. ta.correlation reads na until the pair has 90 returns.
• The report's name carries the window, so runs with two windows don't overwrite each other.

Traps

• A pair steps on days either coin printed. A coin with no print that day holds its last close, so its return that day is 0. That pulls a thinly traded coin's correlations toward 0.
• Correlation is not a trade. It says two coins moved together over the window, not that they will.

See also

• Each and pairs
• Reports
• Pair ratio scan