As you’ve learned, currency correlations constantly shift over time, making it essential to keep track of the current correlation coefficients and their direction.
The good news? You can easily calculate these correlations right at home using your favorite spreadsheet software.
For this example, we’ll use Microsoft Excel, but any program with a correlation function will do.
Excel is a powerful tool that lets you analyze historical price data, calculate correlation coefficients, and even visualize the results — all in one place.
In this lesson, we’ll walk you through a simple, step-by-step process to calculate currency correlations in Excel, empowering you to make smarter, data-driven trading decisions.
Step 1: Gather Historical Price Data
You won’t need to create price data yourself. Instead, download historical price data for the currency pairs you want from sources like FXCM, Yahoo Finance, or the Federal Reserve. Aim to get at least the last six months of daily closing prices.
Step 2: Open Excel
Step 3: Import Your Data
Copy and paste your downloaded data into a new spreadsheet or open the exported file directly.
Step 4: Organize Your Data
Arrange your data neatly, with each currency pair’s prices in separate columns. Customize the look however you like—just maybe avoid bright yellow fonts!
Step 5: Choose Your Timeframe
Decide whether you want to calculate correlation for the last week, month, or year. Your available data will guide this choice. For this example, we’ll use one month.
Step 6: Start the Correlation Formula
In the first empty cell below your data, type: =CORREL(
Step 7: Select the First Data Range
Highlight the price data range for your first currency pair (for example, EUR/USD), then type a comma.
Step 8: Select the Second Data Range
Highlight the price data for your second currency pair (e.g., USD/JPY).
Step 9: Calculate the Correlation
Press Enter, and Excel will display the correlation coefficient between the two pairs.
Step 10: Repeat
Repeat these steps for all other currency pairs and timeframes you want to analyze.
Once complete, you can create a clean, professional-looking table with all your correlation coefficients — now that is pro status!
Additional Tips
Calculating correlations over trailing periods like one week, one month, three months, six months, and one year gives a comprehensive view of currency relationships.
How often you update your correlation table is up to you. While daily updates might be overkill (unless you’re a correlation fanatic), refreshing your data every couple of weeks should keep you well-informed.
If you catch yourself manually updating correlation tables every hour, maybe it’s time to take a break and pick up a hobby!