for which forex pairs is eurusd correlation negative?
I always hedge my EUR/USD trades with USD/CHF and CAD/CHF. Currently I am able to get lower spreads on USD/CHF with my broker ic markets who are great for hedging.
While eurusd has been bearish today, this is the usdchf chart looking bullish an exact opposite
yh, they are both negatively correlated.
When USD/CHF moves opposite to EUR/USD, that's not correlation in the trading sense, it's just mathematical mechanics.
Both pairs share the USD as a component, so they mechanically move in opposite directions by definition. When USD weakens, EUR/USD rises and USD/CHF falls automatically. This is algebra, not market correlation. The coefficient it seems is about -0.90.
In trading, correlation refers to unrelated or independent assets that move together (or inversely) due to underlying market forces.
True hedging or diversification requires finding assets that are unrelated. Using pairs that mechanically move opposite (like EUR/USD and USD/CHF) isn't proper correlation-based hedging. it's just taking offsetting positions on the same underlying variable (USD strength).
Essentially, your trade on one position will be nulled by the other. Your gains on one position are almost completely nullified by losses on the other. You've locked in zero net exposure and zero net profit—you're just paying spreads and commissions for nothing.
What you want when we talk about true hedging, is even if the entire market is falling. one position provides protection while the other declines.
As an intraday trader, you enter a trade with a bias based on your edge, you are either right or wrong. Hedging would completely undermine this by trying to protect both sides, which defeats the entire purpose of taking a position in the first place.
You hardly ever need hedging (there is no point, you are in the position to make profits, or a loss if you are wrong). You have SLs, and small time horizon.
If you are worried about some extreme event, just use a Guarantee SL.
The strongest negatively correlated currency pair to EUR/USD is USD/CHF.
When EUR/USD goes up, USD/CHF often goes down, and vice-versa.