Strong positive (0.8–1.0) — move almost identically
Moderate positive (0.5–0.8) — often move together
Weak positive (0.2–0.5)
No correlation (−0.2 to 0.2)
Weak negative (−0.5 to −0.2)
Moderate negative (−0.8 to −0.5)
Strong negative (−1.0 to −0.8) — move opposite
Correlation Matrix — Major & Key Pairs (approximate, based on historical averages)
Important: Correlations are not fixed — they change with market regime, risk sentiment, and central bank policy. The values above represent typical averages over multi-year periods. During risk-off events (crisis, flash crashes), correlations can temporarily approach ±1.0 across many pairs simultaneously. Always check current correlation data from your broker or a live correlation tool when making portfolio decisions.
Key Correlation Relationships to Know
Pair Relationship
Typical Correlation
Why It Matters
EURUSD ↔ GBPUSD
+0.80 to +0.90
Both pairs move together vs USD. Trading both long = doubling USD exposure, not diversifying.
EURUSD ↔ USDCHF
−0.85 to −0.95
Near-perfect inverse. Long EURUSD + long USDCHF ≈ hedged position. Use for risk reduction.
EURUSD ↔ USDJPY
−0.40 to −0.60
Moderate inverse — not reliable enough to assume hedge. Check weekly before using.
GBPJPY ↔ EURJPY
+0.90 to +0.96
Extremely correlated — both JPY cross pairs. Don't trade both as separate diversified ideas.
XAUUSD ↔ EURUSD
+0.50 to +0.70
Gold often moves with EUR vs USD (both weaken when USD strengthens). Stacks risk if combined.
AUDUSD ↔ XAUUSD
+0.70 to +0.85
Australia's economy is gold-linked. When gold rises, AUD typically follows. Doubles commodity exposure.
Both commodity/risk-on currencies. Almost always move together — not two separate ideas.
USDJPY ↔ S&P 500
+0.50 to +0.70
Risk-on: stocks up → USDJPY up (carry trade). Risk-off: stocks crash → JPY strengthens sharply.
Portfolio Risk Rule
The multi-pair trap: Trading EURUSD + GBPUSD + AUDUSD all long at the same time is not three separate trades — it is three times your USD short exposure. If USD rallies, all three hit stop simultaneously.
Practical rule: If the correlation between two pairs exceeds +0.7, treat them as one trade for risk purposes. Only risk your intended % on one of them, or split the position: 0.5% on each instead of 1% on both.
During backtesting: Test pairs in isolation first. Once you understand each pair's individual edge, then study how combining them affects overall portfolio risk. FXAbsolute lets you replay any pair — test correlation awareness by backtesting EURUSD and GBPUSD setups on the same date and comparing how they moved.