| Purpose | Analyze statistical relationships between assets, strategies, and market factors to optimize diversification and identify trading opportunities |
| Core Function | Calculates, monitors, and interprets correlation coefficients across multiple dimensions to support portfolio construction, risk management, and pairs trading |
| Sector Correlations | 0.80-0.90 (very high) • 0.30-0.50 (low-moderate) • 0.60-0.75 (moderate-high) • 0.50-0.65 (moderate, both defensive) • 0.65-0.80 (high, interest rate sensitive) |
| Fii Flow Nifty | 0.40-0.60 • FII flows often lead market by 1-2 days • Predictive indicator for market direction |
| Dii Flow Nifty | Often negative (-0.20 to -0.40) • DIIs often buy when FIIs sell (contrarian) • DII buying in falling market can signal bottom |
| Fii Dii Correlation | -0.30 to -0.60 • Usually opposite - one buys, other sells • Both buying = strong rally, both selling = panic |
| Intraday Correlation | Higher correlation with global cues (9:15-11:00) • Lower correlation, domestic factors dominate • Correlation picks up with global positioning |
| Weekly Patterns | Higher correlation with Friday US close • Increased Bank Nifty-Nifty correlation • FII/DII rebalancing affects correlations |
| Event Correlations | Banking sector correlation spikes • All sectors correlate more during announcement • Sector correlations temporarily break down • Stock-specific moves, lower sector correlation |
| Price Data | NSE/BSE historical data, broker APIs |
| Flow Data | NSE FII/DII daily data (published by 6 PM) |
| Derivative Data | OI, PCR for sentiment correlation |
| Global Data | SGX Nifty, US futures for lead-lag |
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