Asset Correlation Heatmap [SeerQuant]

Asset Correlation Heatmap [SeerQuant]

Overview:
The Asset Correlation Heatmap is a powerful visualization tool designed to analyze and compare the correlation between multiple assets and a selected benchmark. The indicator provides a heatmap representation of correlation coefficients, allowing for easy identification of highly correlated and uncorrelated assets at a glance.

How It Works:

• Benchmark Asset: The benchmark is the chart that the indicator is applied to. For example, if applied to BTC, the heatmap will display the correlation of various assets relative to BTC.
  
• Correlation Calculation: The script calculates the correlation coefficient between the benchmark asset and each of the 30 user-selected assets over a user-defined period.
  
• Heatmap Display: The results are plotted in a stacked format where the bottom-most plot represents Asset 1, and the top-most plot represents Asset 30.
  
• Each asset’s correlation is color-coded based on its strength (from positive correlation to negative correlation).
  

Inputs & Customization:

• Correlation Length: Users can adjust the lookback period for correlation calculation (default: 20 periods).
  
• 30 Selectable Assets: The indicator allows users to input up to 30 assets for correlation analysis.
  
• Color Gradient: The heatmap dynamically assigns colors based on correlation strength where blue shades → strong positive correlation, neutral white → no correlation (~0.0) and red shades → strong negative correlation.
  

Table Display
A dynamic table in the bottom-right corner provides key insights, including:

• Benchmark Asset (the chart symbol)
  
• Highest Correlated Asset & its correlation value
  
• Lowest Correlated Asset & its correlation value
  
• Average & Median Correlation across all selected assets
  
• Composite Signal based on the overall correlation trend
  

Use Cases

• Portfolio Diversification: Identify assets that are highly correlated or negatively correlated with your benchmark to manage risk.
  
• Mean Reversion & Trend Following: Spot assets diverging from their historical correlation to identify trading opportunities.
  
• Pair Trading: Find assets with strong positive or negative correlation to develop hedging strategies.
  

Enjoy!