The Stock Market is Changing, Profit from It

As reported by Small Cap Network’s Jonathan Yates, small cap traders in top gaining stocks such as Sinovac Biotech (NYSE: SVA), BOS Better Online Solutions (NASDAQ: BOSC), Novavax (NASDAQ: NVAX), and CoreLogic (NASDAQ: CLGX) should look to correlation strategies to maximize profits.  According to a recent article in The Wall Street Journal, “Traders seek Salvation from Correlation,” stocks have a correlation of 80% in today’s stock markets.  With major institutions and high frequency trading dominating the stock markets, this is not surprising.  It also offers profit opportunities for small cap traders.

High-Frequency Trading Leaders Forum

Correlation quantifies the relationship between different data sets, in this case securities.  For a perfect positive correlation trading relationship between two equities, calculated as a correlation coefficient of +1, the two securities move in the same direction and with the same percentage change all the time. This type of correlation would be seen between the S&P 500 index and the SPY exchange traded fund which tracks the index.  Mastering the relationship between exchange traded funds and correlation trading is crucial as these now account for 30% of the volume in US stock markets, up from just 2% in 2000.

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