Forex Automaton > Forex Research > Have the forex markets been efficient? > AUD/USD and EUR/CHF 2002-2008: the least correlated combination?

AUD/USD and EUR/CHF 2002-2008: the least correlated combination?
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Written by Mikhail Kopytine   
Wednesday, 25 June 2008 15:27

Australian Dollar/US Dollar and Euro/Swiss Franc are extremely weakly correlated currency pairs. Unlike all other combinations of exchange rates looked at so far, this pair shows most correlation during the Asia-Pacific trading session. For the period under study, the correlation is limited to the 1-hour wide 0 time-lag bin and therefore offers little value to the forecaster. For the risk management and diversification, it is good to know that such an exceptionally low correlation exists in the high liquidity forex.

Table: Pearson correlation coefficient for the time series of logarithmic returns in AUD/USD and EUR/CHF in various trading sessions in 2002-2008. Time frames of the sessions are shown in New York time.

time scale Asia-Pacific session European session American session
hour 0.05 0.00 0.02

There is practically no correlation between AUD/USD and EUR/CHF on average for the period.

AUD/USD and EUR/CHF intermarket correlation 1 hour time-lag bin

Fig.1: Cross-correlation of AUD/USD and EUR/CHF, derived from the hour-by-hour logarithmic returns, for the three trading sessions. Time frames of the sessions are shown in New York time.

A pretty unique plot -- a pair of exchange rates with very little correlation between them. Not much to talk about, but good to know in order to diversify well.

The data used are from the period 2002-08-20 00:00:00 to 2008-02-01 00:00:00.

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