Correlation Between ES and FESX

[TraderGT 10]

Hi, all

 

Do any members here trade both the E-mini S&P 500 (ES) and DJ Euro STOXX50 (FESX) contracts? If so, could you possibly say a few words on how closely the two instruments correlate, especially around the release of important US economic data?

 

Thanks!

[uexkuell 10]

Hi, all

 

Do any members here trade both the E-mini S&P 500 (ES) and DJ Euro STOXX50 (FESX) contracts? If so, could you possibly say a few words on how closely the two instruments correlate, especially around the release of important US economic data?

 

Thanks!

 

They are highly correlated most of the time, especially before news releases.

 

If they are not correlated so much it means, that something is on the way.

 

But that high correlation is just the same for all the major indices (also DAX, CAC, FTSE).

 

 

If you want to have a look on your own (free charts):

https://isht.comdirect.de/html/detail/main.html?hist=3m&sSym=DAX.ETR&DEBUG=0&iSLid=32&ind0=VOLUME&overview_hist=10d&sCat=IND&sIsin=DE0008469008&sTab=chart&sWkn=846900&type=CONNECTLINE

 

To the lower right you will find a point:

"Vergleich wählen"

There you can select several indices to compare against DAX. Watch the perfect synchronicity.

[edeeb 10]

mark katsanos wrote a book called "intermarket trading strategies," and the ES pretty much leads everything during normal hours (he uses lagged correlation studies).

 

however, overnight, the FESX leads the ES and he has a strategy built for it using a 15 minute time frames.

 

on the downside, it trades very infrequently, it needs tweaking and optimizing, and i couldn't really get very good results. i confess i didn't work very hard on it because it's mathematically and indicator based, and a little over my head.

 

on the upside, the entries look pretty good when looking at a chart and his lead lag work is very sound.

 

most of the book is geared towards longer term trading, but is very good and interesting (like using gold miners to forecast the direction of gold). the lead lag relationship studies alone are worth the price, especially if you have your own divergence model.

 

i have the book in front of me and here are a few notes:

some of the components FESX/ES are linear regression divergence, a congestion index (as opposed to the ADX), intermarket momentum indicator, stochastics, and macd. it basically looks for a divergence, and alters between mean reversion (stochastics) and trend following trades (macd).

 

personally, have never used technical indicators in my day trading career, tried using them in systems, but am finding i'm not comfortable with them in trying to develop systems.

 

http://http://www.amazon.com/Intermarket-Trading-Strategies-Wiley/dp/0470758104

 

how could one someone build a strategy based on the the FESX-ES overnight lead lag relationship using just range based analysis would be something i would love to hear about

Edited July 5, 2009 by edeeb

[uexkuell 10]

The question which index is leading the other may have played a role some time ago.

 

Today it can be demonstrated at the tick level that changes in different indices are differing only by milliseconds and it cannot be said that index A is always the first to move and B the second or vice versa.

 

(Surely there is a difference between the various contracts in volume traded but it might be a bit too simple to use this as a criterium for leading or not)

[BlowFish 10]

Not just at the tick level, sometimes the ES will look weak and the European markets whilst not surging ahead will not drop so far. Other times the reverse. Currencies, notes, and even commodities play there part too. It's a huge intricate web imho. Also a lot of the largest companies in the world that directly effect the indexes are in Europe and Asia.

[TraderGT 10]

Thanks for the useful feedback!

 

sometimes the ES will look weak and the European markets whilst not surging ahead will not drop so far. Other times the reverse.

 

This seems to suggest that, at certain times, the close correlation between ES and FESX could abruptly weaken, perhaps very briefly. Fair comment?

[horace 10]

hi there,

 

This thread is almost three years out of date and I wondered if some of you clever guys could update it with your thoughts please as correlations can change over time.

 

I will be in Europe for a while and I have been told that the FESX is the closest index to ES

for intraday trading and ES is what I have been following in The US.

Do you think that this is correct?

 

many thanks

[BlueHorseshoe 10]

hi there,

 

This thread is almost three years out of date and I wondered if some of you clever guys could update it with your thoughts please as correlations can change over time.

 

I will be in Europe for a while and I have been told that the FESX is the closest index to ES

for intraday trading and ES is what I have been following in The US.

Do you think that this is correct?

 

many thanks

 

Hello,

 

Why not just trade the ES from Europe? It means you don't have to get up early in the morning!

 

Bluehorseshoe

[horace 10]

Hello,

 

Why not just trade the ES from Europe? It means you don't have to get up early in the morning!

 

Bluehorseshoe

 

Hi BHS,

 

Yes I agree, but I am also interested in people's thoughts on the FESX correlation

[uexkuell 10]

This thread is almost three years out of date and I wondered if some of you clever guys could update it with your thoughts please as correlations can change over time.

 

Everything I stated three years before in this thread still is holding true.

[BlueHorseshoe 10]

Hi BHS,

 

Yes I agree, but I am also interested in people's thoughts on the FESX correlation

 

Of course - I wasn't meaning to be unhelpful or dismissive.

 

Why not use a free charting package such as ProRealTime (there are also dozens of others listed on a thread here) and then perform a data-mining exercise to determine precise statistical levels of correlation between the two? At the simplest level you can just insert a banded correlation indicator and reduce the lookback period right down to one or two.

 

I hope that's useful to you.

 

Bluehorseshoe