Correlation Based Risk

Code Structure

The code structure separates concerns: data ingestion, signal generation, risk checks, and order submission. This modularity enables testing and reuse across strategies.

# Example configuration for Correlation Based Risk
strategy:
  name: correlation-based-risk
  timeframe: 5m
  indicators:
    - rsi
    - ema_fast
    - ema_slow
  entry_conditions:
    - rsi_oversold
    - ema_crossover_bullish
  exit_conditions:
    - rsi_overbought
    - stop_loss_hit
  risk:
    max_position_size: 0.02
    stop_loss_pct: 0.015

Configuration Example

Configuration for correlation based risk uses YAML or JSON format. Key parameters include timeframes, signal thresholds, position sizing rules, and risk limits.

# Example configuration for Correlation Based Risk
strategy:
  name: correlation-based-risk
  timeframe: 5m
  indicators:
    - rsi
    - ema_fast
    - ema_slow
  entry_conditions:
    - rsi_oversold
    - ema_crossover_bullish
  exit_conditions:
    - rsi_overbought
    - stop_loss_hit
  risk:
    max_position_size: 0.02
    stop_loss_pct: 0.015

Production Notes

In production, correlation based risk requires monitoring for API rate limits, database connection pooling, log rotation, alert thresholds, and automated restart procedures. Document runbooks for incident response.

Core Concepts

Understanding correlation based risk requires familiarity with market microstructure, order flow dynamics, and execution latency. The following sections detail each component.

Common Issues

Common issues with correlation based risk include look-ahead bias in backtesting, overfitting to historical regimes, inadequate handling of exchange downtime, and insufficient logging for debugging.