Correlation Oscillator - Anomaly Alerts

2021年1月5日

This script plots the correlation for two symbols as an oscillator:
A correlation of 1 means that both values move in the same direction together.
A correlation of -1 means that both values are perfectly negative correlated.

Parameter:
Length of the Correlation
The two symbols you want to calculate the correlation for
Barcolor: Defines whether Bar-coloring is set on.
The Number of bars lookback for anomaly: Say both are normally positively correlated it is an anomaly when the correlation turns negative and vica-versa.

Alerts: You can also set an Alert when an anomaly is detected.(blue dots on oscillator)


This has many use-cases:

For example VVIX and VIX are normally positive correlated.

When this turns negative, this can mean that we are on a turning point:
--> VVIX is rising while VIX is falling, risk of future Volatility is increasing (Top)
--> VIX is rising while VVIX is falling, risk of future Volatility is decreasing (Bottom)

Another use-case is just checking the correlation of stocks in your portfolio to diversify.