Correlation Analysis is a one of forex technical indicator often used in forex technical analysis. Correlation Analysis was developed to compares a stock to any indicator or another stock and demonstrates how like or dislike they are to one another.

Correlation analysis involves a “dependent” and an “independent” variable. Correlation analysis measures whether or not a change in the independent variable will result in a change in the dependent variable.

A low correlation coefficient (e.g., ±0.10) suggests that the relationship between the two variables is weak or non-existent. A high correlation indicates that the dependent variable (e.g., the security’s price) will change when the independent variable (e.g., an indicator) changes.

The direction of the dependent variable’s change depends on the sign of the coefficient. If the coefficient is a positive number, then the dependent variable will move in the same direction as the independent variable; if the coefficient is negative, then the dependent variable will move in the opposite direction of the independent variable.

A useful feature of correlation analysis is its predictive capability, because the correlation coefficient shows how well a change in the independent variable (e.g., an indicator) predicts a change in the dependent variable (e.g., the security’s price).

The Correlation indicator can be used in three ways:
- Correlation of a security’s price to an indicator
- Correlation of one security to another
- Correlation of one indicator to another