Stock Market Tools (13) – Using Correlation as Pattern Recognition
By KH Tang's Blog  •  February 12, 2014


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The above slide shows the concept of correlation formula of two set of data.  In application wise, it can use for pattern recognition.  Such as image or voice recognition, etc.

In his latest book, "Cycle Analytics for Traders", John F. Ehlers even uses it to calculate the dominant cycle in the stock chart.

So, in broad term, Correlation can be used to find the similar patterns in stock market charts.
There are various usages:

* Such as using one index or ticker to confirm another - like Dow Jones Transport Index to confirm the bull or bear state of Dow Jones Industrial Average in the past (may be not so valuable now as internet age taken over, and many software products can be download online.)

* Find some current patterns that highly correlated with historical patterns, and use it for prediction that it will follow through in the short ...
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By KH Tang's Blog
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