Triple Correlation Signal by COCOSTA

Triple Correlation Signal by COCOSTA

Concept

Bitcoin experiences violent swings driven by large liquidations and panic selling. During these chaotic market events, Bitcoin often decouples from its usual correlation patterns with traditional assets like gold, copper, and equity indices.

This indicator identifies these critical moments when an asset simultaneously loses correlation with three major reference assets—a phenomenon that typically signals oversold conditions and extreme market dislocations.

How It Works

The Triple Correlation Signal monitors the correlation coefficient between your primary asset and three customizable assets. Simply apply it to any chart—the signals will trigger based on that asset's correlation behavior.

Default Setup: Bitcoin (BTC1!)

• Gold (GC1!) - Safe-haven asset correlation
  
• Copper (HG1!) - Industrial/economic growth correlation
  
• NASDAQ-100 (US100) - Technology/equity market correlation
  

When all three correlations fall below zero simultaneously, the indicator triggers a signal. This rare multi-asset decorrelation event suggests that the asset has decoupled far beyond normal trading ranges—often indicating extreme selling pressure that has pushed prices to unreasonable levels.

Signal Visualization

The indicator displays signals as vertical lines that span the full chart height when all three correlations drop below zero. A semi-transparent red background also highlights periods when the signal condition is active. This neutral visual representation avoids implying a specific directional bias.

Universal Application

This indicator works on any ticker or asset class. Simply change the chart to your desired asset and adjust the three correlation symbols to match different market combinations:

• Stocks: Compare against sector indices, VIX, and bond futures
  
• Commodities: Compare against currencies, equity indices, and related commodities
  
• Forex: Compare against central bank proxies, commodity indices, and equity markets
  

Why Use BTC1! (CME Bitcoin Futures)

For Bitcoin specifically, use BTC1! (CME Bitcoin Futures) rather than spot BTCUSD. Since traditional assets like gold (GC1!) and copper (HG1!) trade on CME with market hours, using BTC1! ensures synchronized trading sessions and accurate correlation measurements. The 24/7 spot market can create timing mismatches that distort correlation readings.

Trading Application

• Signal triggers = Potential capitulation events and oversold extremes
  
• Best used with other confirmation indicators (support levels, RSI, volume analysis)
  
• Customizable correlation length (default: 62 bars) and asset symbols to match any strategy
  

Finding Your Edge

Experiment with different asset combinations for your trading interest. If you discover particularly effective correlation combinations—especially for underexplored assets—feel free to reach out. Your insights help COCOSTA continuously improve market analysis tools.

Key Insight

When massive liquidations force panic selling, assets temporarily break their normal relationships with other markets. The Triple Correlation Signal catches these precise moments—your edge in identifying when any asset has been sold below reasonable value.

Created by COCOSTA | Advanced Market Analysis Tools