Or more completely:
period is an input
double alpha = 2 / (period + 1);
...
n++;
sumX += alpha * (balance - sumX);
sumXX += alpha * (balance * balance - sumXX);
sumY += alpha * (price - sumY);
sumYY += alpha * (price * price - sumYY);
sumXY += alpha * (price * balance - sumXY);
if (n > period) { // wait for period minutes of data
before calculating
double numerator = period * sumXY - sumX * sumY;
double denominator = Math.sqrt(period * sumXX - sumX *
sumX) * Math.sqrt(period * sumYY - sumY * sumY);
if (denominator != 0) {
value = 100 * (numerator / denominator);
}
}
On Aug 4, 5:05 pm, MKoistinen <[email protected]> wrote:
> Have you tried using EMA-like processing to weight the most recent
> events higher?
>
> so
> n++;
> sumX += balance;
> sumXX += (balance * balance);
> sumY += price;
> sumYY += (price * price);
> sumXY += (price * balance);
>
> becomes:
> n++;
> sumX += alpha * (balance - sumX);
> sumXX += alpha * (balance * balance - sumXX);
> sumY += alpha * (price - sumY);
> sumYY += alpha * (price * price - sumYY);
> sumXY += alpha * (price * balance - sumXY);
>
> It seems like this should do the trick...
>
> On Aug 4, 4:22 pm, nonlinear5 <[email protected]> wrote:
>
> > I have a new indicator, called DepthPriceCorrelation. It's not in the
> > release yet, but it's in
> > SVNhttp://code.google.com/p/jbooktrader/source/browse/trunk/source/com/j...
>
> > The indicator is based on the idea that current price can be
> > considered "fair" when the correlation between market depth balances
> > and market prices is positive. This positive correlation occurs when:
>
> > -- high depth balances are accompanied by higher prices
> > or
> > -- low depth balances are accompanied by lower prices
>
> > When the correlation is negative, the prices are moving in the
> > direction opposite from the direction of depth balances, and I call it
> > a "high tension" condition. This is when my strategy gets into a
> > position on the bet that the tension will ease and the correlation
> > will return to its "normal" positive value. Here is an example of such
> > a
> > strategy:http://code.google.com/p/jbooktrader/source/browse/trunk/source/com/j...
>
> > Now, to calculate the correlation, the indicator simply updates the
> > running sums for prices and balances, and then uses a standard
> > correlation coefficient formula to come up with the result. This is
> > very efficient, and it works well. The problem is, sometime in the
> > second half of the trading session, the indicator becomes too "stale",
> > because it uses all the data accumulated so far during the trading
> > session. So, at say, 2pm, the indicator would represent the
> > correlation between balances and prices based on all the data from
> > 9:30am to 2pm, while my strategy is looking for a shorter term
> > correlation, such as the last 2 hours. It's certainly possible to
> > recalculate the indicator based on this 2-hour moving window, but it
> > would be very computationally expensive, since every time, I would
> > need to loop through the last two hours of values, instead of simply
> > updating the running sums.
>
> > So, here is the question for the algorithmically inclined. How do I
> > *efficiently* calculate the correlation between X and Y in a moving
> > time window?
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