Description

• Covariance is a measure of the degree to which two stocks move together i.e. relative comparison between different price values

Interpretation

• A positive covariance means that the two price lines move together
• A negative covariance means that the two price lines differ in their values

For eg. A slope rises when it is above 20-day SMA and falls when it is below it

Default Parameters Used/Inputs

• Price Line 1
• Price Line 2
• Bars

Returns/Output

Moving Covariance of the stock at specified period

Formula

For two input lines I1[X]and I2[X], SMA S[X]=SMA(I[X],R)
Difference, D[X]=I[R]-S[X]
CD12[X]=Cum((D1[X]*D2[X]),R)
MCov(X,R)=CD12[X]/X
where MCov indicates Moving Covariance