How can I normalize price data for 2 financial instruments from different categories?
How can I normalize price data for 2 financial instruments from different categories?
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Riley Bolen · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: Riley Bolen
Original post: https://quant.stackexchange.com/questions/51049
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
Lets say I want to build a divergence / convergence strategy with FOREX currency pair and a correlated commodity. How can I normalize the prices so that I get an accurate idea of the movements of each, relative to each other? Obviously a move of 10¢ is much more significant on a currency pair than on a commodity. And how can I keep the data properly normalized over time, as new data continues to come in?
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: Riley Bolen Source score (net votes, not local likes): 0 Original post: https://quant.stackexchange.com/questions/51049 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Lets say I want to build a divergence / convergence strategy with FOREX currency pair and a correlated commodity. How can I normalize the prices so that I get an accurate idea of the movements of each, relative to each other? Obviously a move of 10¢ is much more significant on a currency pair than on a commodity. And how can I keep the data properly normalized over time, as new data continues to come in?
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