The popular wisdom that currencies trend more than other markets does not seem so wise. Both the S&P 500 index and Boeing stock showed higher counts of extreme correlation coefficients (because of their up trends) than the forex instruments. The same is true for the 10-year yield in that its count for high correlation readings during the downtrend are larger than the currencies’ uptrend or downtrend counts.
However, the choice of a different window for measuring the correlations may yield different results. A 10-week rolling correlation window might be too long for some traders; selecting a shorter review period may be more appropriate. Nevertheless, from this longer-term perspective, there’s no basis from which to argue these currencies have better trend characteristics than the representative instruments they were tested against.
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