Delta-Agnostic Correlation Coefficient (alt)Calculate a sort of correlation between two symbols based only on the sign of their changes, regardless of the amplitude of price change.
When positive, the two symbols tend to move together. When negative, the symbols move in opposite directions.
Since there is no significance calculation, and that the result is binary, keep in mind that correlation will always tend to go towards 1 or -1 even when there is no correlation. To reduce this issue, an EMA or SMA is applied to smooth out transitions: SMA smoothes over the selected length period but adds lag, whereas EMA smoothes amplitude without any additional lag. Hence, to know if the correlation is true or not, try to look at the amplitude and the number of consecutive days the correlation is maintained (both quantities are related), because when the correlation is spurious, it will tend to switch more or less alternatively between 1 and -1 and hence will hover around 0, whereas if the correlation is true, it will get further away from 0 and closer to 1 or -1.
In addition, since there is some time lag for the correlation to switch sign, the area is colored to know the current candle's correlation, regardless of past data's correlation: blue is a positive correlation (1), yellow is negative. The coloring can allow to know a trend reversal early on, but it's noisy.
Finally, symbols with closing days are better accounted for, with the correlation set to 0 on closed days (e.g., on week-ends), and the area is then colored in gray to signal that there is no new correlation data.
This is an improved fork over the original indicator by alexjvale, please show him some love if you like this work:
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