Benefits? of trading correlated markets simultaneously

["Mark Johnson" <janitor@xxxxxxxxxxxx>]

Bill Vedder writes:
"The prices (cotten and five year notes) are almost
perfectly non-correlated (coeff = -0.070) yet the
equity curves are extremely well correlated (coeff =
+0.942). So this trading system did a good job of
extracting profits out of two very different market
price behaviors."

You can't draw that conclusion from the information
you've given. The fact that the equity curves are
correlated means nothing wrt to whether the tradings
ytem made money.


Very true.  Both of the highly-correlated equity curves
might be whipsawing up and down, in lockstep, without
making any net profits.  Or they both might be sliding
down the toilet, making huge losses, in tandem.

However, in this case, they're not.  FiveYearNotes is
making about +$1300 profit per contract per trade, and
Cotton is making about +$1600 profit per contract per
trade.  I uploaded a plot of these two equity curves,
you can have a look at their profits & losses if you
wish:

<http://traderclub.com/discus/messages/18/2096.html?FridayMay220030607am#POST13276>

Thanks,
Mark Johnson