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Overnight vs Intraday stock market correlation

June 5, 2019

“Why should a trader approach overnight trading?”

Before looking at potential high returns, I would answer:

“Because of its correlation to intraday stock market movements!” I would reply.

What does it mean? The greatest strategies or systems to add to a portfolio of strategies or systems are those uncorrelated or negatively correlated to the general performance of stock markets. This is the only way to unveil the Shannon’s Demon. Especially those uncorrelated to the intraday stock market returns. One of the best proxy for the stock market is the SPY etf.

Here’s the big number: -0,017

That’s the correlation between all nights and all intraday returns since SPY inception in 1993. It’s slightly below zero. It means the overnight session is not correlated at all with the intraday session. It’s like a two uncorrelated stocks portfolio!

That’s all folks!

P.S. In the chart above, intraday returns are on X asses and overnight returns are on Y asses.



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