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Time-scale dependence of correlations among foreign currencies

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  • Takayuki Mizuno
  • Shoko Kurihara
  • Misako Takayasu
  • Hideki Takayasu

Abstract

For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there is a time delay of order less than a minute between two currency markets having a strong cross-correlation. The cross-correlation between exchange rates is lower in shorter time scale in any case. As a corollary we notice a kind of contradiction that the direct Yen-Dollar rate significantly differs from the indirect Yen-Dollar rate through Euro in short time scales. This result shows the existence of arbitrage opportunity among currency exchange markets.

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  • Takayuki Mizuno & Shoko Kurihara & Misako Takayasu & Hideki Takayasu, 2003. "Time-scale dependence of correlations among foreign currencies," Papers cond-mat/0303306, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0303306
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    References listed on IDEAS

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    1. Aiba, Yukihiro & Hatano, Naomichi & Takayasu, Hideki & Marumo, Kouhei & Shimizu, Tokiko, 2002. "Triangular arbitrage as an interaction among foreign exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 310(3), pages 467-479.
    2. L. Kullmann & J. Kertesz & K. Kaski, 2002. "Time dependent cross correlations between different stock returns: A directed network of influence," Papers cond-mat/0203256, arXiv.org, revised May 2002.
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