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§07 CORRELATION_MATRIX

OVERVIEW

Correlation Matrix takes two to ten tickers and prints their pairwise Pearson correlation of daily returns over a chosen lookback window. Green cells cluster names that move together; red cells cluster names that move opposite; faint or transparent cells identify diversifiers. It is the first place to check when a portfolio looks balanced but every position moves on the same day.

CORRELATION_MATRIX

The tool pulls daily closing prices for each symbol over the selected window, converts them to a returns series using simple period-over-period returns (p_i − p_{i−1}) / p_{i−1}, runs Pearson across every pair, and returns the full matrix. Results are cached per symbol set and window, so reordering tickers in the UI does not trigger a refetch.

Note

The window options are calendar days, not trading days. Trading-day filtering is applied server-side before the computation runs.

FEATURES

Color Encoding

Values run from −1.00 to +1.00. Cell backgrounds bin the correlation strength as follows:

Range Background Text color
≥ 0.80 Dark green Green
0.50 – 0.79 Medium green Green
0.20 – 0.49 Faint green Neutral
−0.20 – +0.20 Transparent Neutral
−0.21 – −0.49 Faint red Neutral
−0.50 – −0.79 Medium red Red
≤ −0.80 Dark red Red

The diagonal is always 1.00, dimmed and shaded — a symbol is perfectly correlated with itself.

Feature flags: correlation.fullTickers and correlation.allPeriods control the tier gates. Hard cap across all tiers is 30 symbols per request. Day-count range is clamped between 30 and 2000 days.

Fields

Column / Cell Description
Row header Ticker in monospace green
Column header Same tickers repeated across the top
Cell value Pearson correlation of daily returns over the window, rounded to two decimals
Cell background Color bin as described above
Cell text color Green ≥ 0.50, red ≤ −0.50, neutral in between
Diagonal Always 1.00, dimmed and shaded

HOW TO USE

Path: /correlation Sidebar group: §TOOLS Keyboard shortcut: None

  1. Open /correlation. If a watchlist is active on /dashboard, the first few of its symbols pre-populate automatically.
  2. Type a ticker into the ADD_SYMBOL… box and press Enter, or select from the autocomplete dropdown. Add up to your tier cap.
  3. Click + WATCHLIST to bulk-load the active watchlist, capped at your tier maximum.
  4. Remove a ticker by clicking the × on its chip.
  5. Pick a window: 30D, 90D, 180D, or 1Y. Locked windows display a padlock and do not respond to clicks on Free.
  6. The matrix renders as soon as two valid symbols are present. Adding or removing a symbol, or changing the window, re-runs the computation automatically.

Reading the matrix

Start with the corners. The top-left to bottom-right diagonal is always 1.00. Off-diagonal greens mean the pair moves together; reds mean the pair moves opposite. Faint or transparent cells are your diversifiers.

Common Use Cases

  • Basket sizing — if every name in a watchlist is +0.85 to SPY, there is one idea, not ten.
  • Regime shift analysis — find names that broke from their cluster after a macro event.
  • Pair trades — hunt the deep-red corners for inversely correlated candidates.
  • Sector rotation — load the eleven SPDR ETFs and watch which sectors drift apart week-over-week.
  • Options hedging — select a hedge with a correlation ≤ −0.50 to the position being protected.

LIMITATIONS AND KNOWN BEHAVIOR

  • Symbols without a covered price feed — delisted, sub-$1 OTC, and foreign-listed names — return 0.00 across their entire row and column.
  • Returns use simple period-over-period returns, not log returns. Results are accurate for typical equity pairs over months but diverge at extreme single-day moves.
  • Pearson assumes a roughly linear relationship. Nonlinear pairs (for example, a stock versus its own put-write yield) will appear weaker than they trade.
  • Pearson over short windows is noisy by design. A single large gap day can shift the 30D reading significantly. Use the 90D or longer window to confirm a structural relationship before acting on it.
  • Results are cached. To force a refresh, add or remove a ticker, or change the window.

TROUBLESHOOTING

Every cell value is 0.00 The price history could not be loaded for those rows. The symbol is likely outside the covered universe — common for delisted, sub-$1 OTC, and foreign-listed names. Swap to a tradable proxy such as the ADR or the relevant sector ETF.

§ERR / CORRELATION · feed unavailable The price feed failed for the entire batch. This is usually a brief outage. Refresh after 30 seconds. If the error persists, check the Tapeboard status channel.

30D and 90D work but longer windows show a padlock The account is on Free. The correlation.allPeriods flag unlocks 180D and 1Y windows on Pro and Terminal.

The matrix does not update after removing a ticker Confirm the × click registered — the chip should disappear immediately and the matrix should recompute. If the matrix is stale, change the window once to force a recompute, then change it back.

Correlations look unstable week to week Pearson over short windows is sensitive to outlier days. A single 8% gap can shift the 30D reading materially. Cross-reference against the 90D or 1Y window to distinguish noise from a structural change in the relationship.