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Nightly Patterns vs stock market correlation

June 6, 2019

I wrote last week a post on intraday versus overnight stock market correlation. You can read it here. There’s a further step now: investigating on Nightly Patterns returns vs stock market daily returns.

Is Nightly Patterns doing better than simply entering all nights explored on the last article in terms of correlation?

And second question: is Nightly Patterns doing better of just entering all days in the market (like a buy and hold strategy) in terms of correlation?

The main problem to deal with is that Nightly Patterns doesn’t trade all nights. It only trades on average 1.5 trades per week. How can it be compared to daily stock market behaviour?

Simply comparing monthly returns of Nightly Patterns (trading SPY instead of ES or Emini) and SPY monthly returns.

That’s an easy magic trick!

Here’s the big magic number: -0,1865

Correlation is more than 10 times negatively correlated than last article’s one! This results is due to the high selective power of Nightly Patterns.

And what I like most, if you look at the chart above you can see that the correlation is always below 0. Furthermore, in the last few years it has been steadily around its average of -0,1865. Here we are!

Marco Simioni

 

 

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