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Profile: jbgoodell
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User Name: jbgoodell
Groups: Gold User, Member, TeleChart
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Joined: Tuesday, March 22, 2005
Last Visit: Friday, March 11, 2011 12:28:45 PM
Number of Posts: 1
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Topic: Correlating two indicators
Posted: Friday, March 11, 2011 12:28:41 PM
I wish to correlate the current stochastic with the current stock price and the stock price delayed or advanced (Mathematically, this is called the Covariance). This, of course must be done on a running basis.Mathematically it would involve multiplying the difference between the current stochastic value and its average over some period, say 10 or 20 periods, by the difference between the current price and its average over the same period.This product is then averaged over the same period.The process can be made much simpler by simply multiplying the current stochastic by the current or delayed/advanced price and summing the product over a selected number of periods. Dividing the product by the number of periods is really not necessary since it only adds a constant factor.So, it would be satisfactory to average the product of the current stochastic by the stock price over some number of periods. The stochastic I am looking at now is 12 %K3 imposed over D5.