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Correlation of A-B and C-D kind of assets

sak

Active Member
This is a real life scenario where in the market I am able to transact only A - B and C - D, even though time series of A, B, C and D are published separately.

How do I find the correlation of A - B and C - D. To understand the order of magnitude:

A, B, C, D are order of $50 while

A - B, and C - D are order of $0.50.

They can also turn negative or there are instances in time where A - B and C - D can be zero. Price series A, B, C, D stay positive.
 

Chethan Pai

Active Member
C++
By A-B, are you referring to a long short strategy? If so, then you can think of it as finding the correlation between these two Long short portfolios. Given the timeseries of these 4 assets, you should be able to find the correlations. No sure if your end goal is significantly deviating from what I see. (correlation of thought process!)
 
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