EDIT: When loading this indicator it uses a default symbol for comparison of SPX. On Tradingview SPX is a Daily price (unless you buy real time) so you will see "Loading ..." and never see data. Move out to a daily time frame -or- switch the symbol to something available intraday. /EDIT
Correlates the movement of the price you are graphing to the price of someting else that you pick (default is SPX, see EDIT above)
Comments in code explain what I did. If correlations are too tight for CC to show anything but a flat line try this.
Please comment / improve. ===================== // A simple indicator that looks complex (impress your friends) // Provides rate of change in the propensity of something // to move in correlation with whatever you are graphing.
// Inputs are: // "Compared symbol" - standard Trading View symbol input. You can input ratios & formulas if you like; Defaults to SPX // "Invert?" - by default the indicator shows the item you have charted as numerator and the "Compared symbol" // the denominator. So if you graphed "UVXY" and open this indicator with default compared symbol "SPX" then // the base relationship is UVXY/SPX. Click the box if you want SPX/UVXY (for example) instead. // "Fast EMA Period" - the period for the fast EMA (white line). default = 7 // "Slow EMA Period" - the period for the slow EMA (black line). default = 27. Important: the bakground color of the indicator // changes based on this EMA hitting threshold values below. // "+ threshold" - > threshold for green background. default = 1.0 // "- threshold" - < threshold for red background. default = 0.99 // "BBand Period" - number of periods back for BBand (1 std deviation) calculation. default = 15
// Does not measure correlation per se - it measures change in that correlation. // If two things do not correlate well in the first place then you will see a lot of noise // and I wish you much luck in interpreting it. // However, if two things do correlate well (like VXX and VIX) then this will help you detect // circumstances where that correlation is unstable. Such instability can signal change in direction. // I developed it to track real time changes in contango / backwardation in various VIX futures instruments which I trade.
// Tip - always try invert - sometimes the correlation changes become clearer. That can be because the threshold bias // towards "+" with the defaults here, so think about what the "logical" relationship is and adjust the thresholds, or invert, // or do both. Just remember - the indicator is below the item you are charting, so the default "source"/"compared" // relationship is intuitive as you look at the screen. Volatility traders, however, will find "invert" useful with default // thresholds signalling "green" for contango and "red" for backwardation.
// Short and long ema trends added for smoothing and trend change indications. // Background color changes to green when correlation changing "positively" and red when "negatively" and white when near 1. // Think of the value "1" as representing the base "1 to 1" correlation between two things. That doesn't mean same price - // it means same rate and direction in change in price.
// 1 std deviation is used to build a basic Bollinger Band in blue. The number of periods for calculating that is an input. // You may find a change in correlation signal outside a Bollinger Band signals a direction change. TV alerts can be // set for such events.