AI-123's BTC vs Gold (Lag Correlation)

DISCLAIMER

I made this indicator with the help of ChatGPT and using what I have learned so far from The Pine Script Mastery Course, LOTS of edits based on what I have learned so far had to be made as well as additions and modifications to my liking thanks to what I have learned so far. I am aware this already exists but I have done my best to make a first ever script/indicator while learning how to properly publish as well, so please bear that in mind.


Overview

This indicator analyzes the correlation between Bitcoin (BTC) and Gold (XAUUSD), with a customizable lag applied to the Gold price, providing insight into the macro relationship between these two assets.

It is designed for traders and investors who want to track how Bitcoin and Gold move in relation to each other, particularly when Gold is lagged by a specific number of days.


Key Features:

BTC and Gold (Lagged) Price Overlay: Display Bitcoin (BTC) and Gold (XAUUSD) prices on the chart, with an adjustable lag applied to the Gold price.

Rolling Correlation Calculation: Measures the correlation between Bitcoin and lagged Gold prices over a customizable lookback period.

Adjustable Lag: The number of days that Gold is lagged relative to Bitcoin is fully customizable (default: 20 days).

Customizable Correlation Length: Allows you to choose the lookback period for the correlation (default: 50 days), providing flexibility for short-term or long-term analysis.

Normalized Plotting: Prices of Bitcoin and Gold are normalized for better visual alignment with the correlation values. BTC is divided by 1000, and Gold by 100.

Correlation Scaling: The correlation value is amplified by 10 for better visual clarity and comparison with price data.

Zero Line: Horizontal line representing a correlation of 0, making it easier to identify positive or negative correlation shifts.

Maximum Correlation Lines: Horizontal lines at +10 and -10 values for extreme correlation scenarios.


Input Settings:

Gold Symbol: Customize the Gold ticker (default: OANDA:XAUUSD).

Bitcoin Symbol: Customize the Bitcoin ticker (default: BINANCE:BTCUSDT).

Lag (in trading days): Adjust the number of trading days to lag the Gold price relative to Bitcoin (default: 20).

Correlation Length (days): Set the number of days over which the rolling correlation is calculated (default: 50).


How to Use:

Price Comparison: The BTC (Spot) and Lagged Gold plots give you a side-by-side visual comparison of the two assets, normalized for clarity.

Correlation Line: The correlation line helps you gauge the strength and direction of the relationship between BTC and lagged Gold. Positive values indicate a strong positive correlation, while negative values indicate a negative correlation.

Visual Analysis: Watch how the correlation shifts with changes in lag and correlation length to identify potential market dynamics between Bitcoin and Gold.


Potential Applications:


Macro Trading: Track how Bitcoin and Gold behave in relation to each other during periods of economic uncertainty or inflation.

Sentiment Analysis: Use the correlation data to understand the sentiment between digital and traditional assets.

Strategic Timing: Identify potential opportunities where Bitcoin and Gold show a strong correlation or diverge based on the lag adjustment.

Understanding Macro Trends/Correlations.


Disclaimer:

This indicator is for informational purposes only. The correlation between Bitcoin and Gold does not guarantee future performance, and users should conduct their own research and use risk management strategies when making trading decisions.


Notes: This script uses historical data, so results may vary across different timeframes.

Customization options allow users to adjust the lag and correlation length to better fit their trading strategy.


Future Enhancements: Additional Correlation Line: A second correlation line for different lengths of lag or different assets.


Color-Coding of Correlation: Future updates may include color-coded correlation strength, visually indicating positive or negative correlation more effectively.