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Math Help - Way to find variance between 2 currency pairs.

  1. #1
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    Question Way to find variance between 2 currency pairs.

    Good day,
    I am hoping to find a way to find variance between 2 currency pairs. These currency pairs have long term high positive correlation(93%) but from time to time they develop an anomaly and one of the moves further away from the other, the correlation goes down and they develop variance/deviation/price gap. I know that in long term they join up and this price gap equalizes and they correlate again. Now the question, I need some formula(for excel preferably) that would calculate this variance in real time from live data that I have in excel.
    I know that standard deviation is able to do this but it takes number of periods into account. I am rather looking for a way to draw this deviation without using any number of periods but live data because if set number periods is used then as time goes by the curve re-draws itself to adjust to the number of periods.. I would be very thankful if someone could help me.
    Thank You
    Slavo
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  2. #2
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    Do you mean that you're looking for the covariance? Variance is the measure of how one variable deviates from its mean.

    If you have the standard deviation from whatever measure you are using, the variance is just the square of that.
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  3. #3
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    Quote Originally Posted by cpbrunner View Post
    Do you mean that you're looking for the covariance? Variance is the measure of how one variable deviates from its mean.

    If you have the standard deviation from whatever measure you are using, the variance is just the square of that.
    Probably not, I am rather looking for a whole different way of comparing these 2 (variables) that would enable me to see their difference(in % in chart) in times when they do not correlate. This way would not take into account n (number of periods) like standard deviation does. hmm?
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