Describes the relationship between “X” and “Y”. If “Y” goes up every time that “X” goes up then the two events are said to be positively correlated. If “Y” goes down every time that “X” occurs, then the two events are negatively correlated. Correlation can range between -1 and +1. A common misconception among traders is that positive correlation means one event causes another. In reality, this may or not be true. Correlation does not imply causation. For example, if ice cream purchases and sunglass purchases both increase in the summer each year, they are said to be correlated. But there is no causation since the purchase of one does not directly influence the purchase of the other.
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