The Complete Guide To Comparison Indicators

The Complete Guide To Comparison Indicators

Comparison indicators are a set of technical tools that analyzes relationships between two or more securities, indices, and markets. The comparison indicators take note of prices, volumes, and volatility and help in determining which exact type of instrument is relatively stronger or weaker over a given or chosen timeframe.

This type of discipline of analysis unfolds a series of convergence and divergent signals Observation for the leading instrument produces a bullish divergent when it gets stronger compared to the lagging indicator. But the leading instrument gets weaker in comparison to the lagging indicator, the situation is predicted to produce a bearish convergence.

Correlation, which is one of the most important metrics in technical analysis, makes use of comparison indicators which is basically the behavior of one instrument to mimic the behavior of another.

To set things into perspective, the first move of correlation analysis is to measure the relationship between two stocks, crypto, or any other securities and bundle a technical indicator over it.

The resulting values that get strung together to form a new indicator visualize in a graphical format how the change in one variable over a period of time influences changes in the dependent variable.

Correlation Coefficient

As mentioned above, the correlation coefficient is a type of indicator which evaluates the relationship between a securities price and a related technical indicator or two different securities.

It should be noted that correlation is always measured by the presence of two variables. One has to be independent, the other is dependent.

Therefore, the further course of action involves the juxtaposition of their performance.

The resulting readings from the evaluation are then assigned a number between negative one to positive one, which means perfect positive correlation at the upper limit and perfect negative correlation with the lower limit respectively.

Price Relative

Price relative indicator is a type of indicator that helps in comparing the price of a security, stock, crypto, or a bond against an underlying index sector or another security through a ratio-based chart.

The indicator is also called the relative strength indicator, and shouldn't be confused with the relative strength index.

To bring this indicator is to read through the convergence and divergent signals that this indicator produces, which may help in the prediction of relative returns on after positions over time.

This indicator is just a simple plot that is calculated by taking the closing price of a dependent variable and dividing it by the closing price of the independent variable. A rising line or rising ratio is an indication that the base security or the dependent variable is rising at a faster pace than the comparative security or the independent variable.

Similarly, a falling ratio is an indication of the dependent variable falling at a faster pace than the
comparative security or the independent variable.


Now the simplicity of the plot function is the visual addition of a singular line on the chart panel. The characteristic of the singular line is to gauge the relative strength and weakness between two instruments.

The blood function scans the price action of a security over the past couple of days, weeks, or months and looks for relative highs and lows in a particular time interval. This leads to the identification of crossovers between securities and is especially helpful in the analysis of finding entry or exit points.

The dynamicity of the plot function with the added simplicity helps in using it in pairs with correlation coefficient and performance index indicators.

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