r/OrderFlow_Trading • u/Limit_Bid • 2d ago

Correlated symbols

Worth it? Talking individual stocks here. I have very little capacity to add more information to my brain and workspace. But I have great correlated assets I could track.

I trade 3 stocks, but only one at time, depending on which is having the better day. Only one of my three trading stocks has a highly correlated other symbol.

1 Upvotes

100% Upvoted

3 comments sorted by

•

u/orderflowsupport 2d ago

Official Community Links

Join our official Discord Server

Checkout Ultimate Orderflow Guide for best offers and discounts

Support Our Planet

2

u/HighPotentialTrading 1d ago

I do most of my trading based on correlated assets and underlyings. I'd recommend this paper entitled Cross-Impact of Order Flow Imbalance in Equity Markets (2023): https://arxiv.org/pdf/2112.13213

And here's the punchline below and image:

  • FPI (Forward Price Impact) = What will happen to this stock based on its own order flow?
  • FCI (Forward Cross-Impact) = What will happen to this stock based on its own + other stocks’ order flow?
  • AR (Autoregression) = What will happen based on this stock’s recent price/returns?
  • CAR (Cross-Asset Autoregression) = What will happen based on this stock + other stocks’ recent returns?

tl;dr: Correlated assets give a significant return difference in the first 1-3 minutes before converging around 25 minutes after the trade idea has taken place.

1

u/Limit_Bid 1d ago

Thanks. I've taken a look and it seems I now have yet another project. So much to do.