Correlation
Any paper or text I read always says to take log return(or just a return) of 2 assets you want to correlate. I am correlating CL and HO and my manager wants me to use Price Level correlations(in other words just straight correl() on the prices).
Anyone understand this rationale?
Straight price will not work. I usually find that correlating price changes (day to day) gives you a much more accurate correl. You can also try lags on products from your base CL data as you're essentially measuring cracks volatility when you are running CL and products correls.
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