EWXCF (Pro.)

Computes the correlation factor using the exponential-weighted correlation function (i.e. using the exponential-weighted covariance (EWCOV) and volatility (EWMAⁱ/EWV) method).

Syntax

EWXCF(X, Y, Order, Lambda, T)

X
is the first univariate time series data (a one dimensional array of cells (e.g. rows or columns)).

Y
is the second univariate time series data (a one dimensional array of cells (e.g. rows or columns)).

Order
is the time order in the data series (i.e. whether the first data point corresponds to the earliest or latest date (earliest date=1 (default), latest date=0)).

Order	Description
1	ascending (the first data point corresponds to the earliest date) (default)
0	descending (the first data point corresponds to the latest date)

Lambda
is the smoothing parameter used for the exponential-weighting scheme. If missing, the default value of 0.94 is assumed.

T
is the forecast time/horizon (expressed in terms of steps beyond the end of the time series X). If missing, the default value of 1 is assumed.

Remarks

The time series is homogeneous or equally spaced.
The two time series must have identical size and time order.
The correlation is defined as:

$\rho^{(xy)}_t=\frac{\sigma_t^{(xy)}}{{_x\sigma_t}\times{_y\sigma_t}}$

$\sigma_t^{(xy)} = \lambda\sigma_{t-1}^{(xy)}+(1-\lambda)x_{t-1}y_{t-1}$

$_x\sigma_t^2=\lambda\times{_x\sigma_{t-1}^2}+(1-\lambda)x_{t-1}^2$

$_y\sigma_t^2=\lambda\times{_y\sigma_{t-1}^2}+(1-\lambda)y_{t-1}^2$

Where:
- $\rho^{(xy)}_t$ is the sample correlation between X and Y at time t.
- $\sigma_t^{(xy)}$ is the sample exponential-weighted covariance between X and Y at time t.
- $_x\sigma_t$ is the sample exponential-weighted volatility for the time series X at time t.
- $_y\sigma_t$ is the sample exponential-weighted volatility for the time series Y at time t.
- $\lambda$ is the smoothing factor used in the exponential-weighted volatility and covariance calculations.

References

Hull, John C.; Options, Futures and Other DerivativesFinancial Times/ Prentice Hall (2003),pp 385-387, ISBN 1-405-886145
Hamilton, J .D.; Time Series Analysis , Princeton University Press (1994), ISBN 0-691-04289-6
Tsay, Ruey S.; Analysis of Financial Time Series John Wiley & SONS. (2005), ISBN 0-471-690740

EWXCF (Pro.)

Syntax

Remarks

References

External Links