Correlation and Cointegration Analysis

Overview

Correlation analysis is a foundational tool for pairs trading, portfolio construction, and risk management. This skill covers four analysis modes (co-movement discovery / return-correlation deep dive / sector clustering / realized correlation), a full cointegration-testing framework, cross-market linkage analysis, and the complete workflow from analytics to pair-trading signals.

Mode 1: Co-Movement Discovery

Use case: Given a target asset, scan a universe for highly correlated assets and build a candidate pool with similar industry or factor exposure, for use in pairs trading or substitute identification.

Workflow