
Thx but why? I want buy/short based on price correlations right? Not returns...

On Saturday, February 20, 2010, Patrick Burns-2 [via R]
<ml-node+1562668-773442928-108803@n4.nabble.com> wrote:
>
>
> You want to use returns, not prices.
>
> Correlations with prices are spurious.
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> (The extreme example is to think of
>
> a long set of series with inflation --
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> all the price series will be positively
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> correlated.)
>
>
>
> On 19/02/2010 23:15, Michael Jungle wrote:
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>>
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>> One possibility is to do the cross-correlation.
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>>
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>> What series shall I apply cross-correlation to? Price or return series?
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>>
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>> If I do cross-correlation on two price series, and found some large
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>> correlation numbers,
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>>
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>> and then do cross-correlation on two return series, and found no significant
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>> numbers(almost zero),
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>>
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>> What does that mean?
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> --
>
> Patrick Burns
>
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> http://www.burns-stat.com
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