What do you trade?
Micros count as their parent: MES = ES, MNQ = NQ, MYM = YM, M2K = RTY, MCL = CL, MGC = GC.
| ES | NQ | YM | RTY | CL | GC | 6E | ZN | |
|---|---|---|---|---|---|---|---|---|
| ES | — | 0.90 | 0.95 | 0.85 | 0.35 | 0.05 | 0.25 | -0.25 |
| NQ | 0.90 | — | 0.85 | 0.80 | 0.30 | 0.05 | 0.25 | -0.20 |
| YM | 0.95 | 0.85 | — | 0.85 | 0.35 | 0.05 | 0.25 | -0.25 |
| RTY | 0.85 | 0.80 | 0.85 | — | 0.35 | 0.05 | 0.25 | -0.25 |
| CL | 0.35 | 0.30 | 0.35 | 0.35 | — | 0.20 | 0.25 | -0.15 |
| GC | 0.05 | 0.05 | 0.05 | 0.05 | 0.20 | — | 0.35 | 0.30 |
| 6E | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.35 | — | 0.20 |
| ZN | -0.25 | -0.20 | -0.25 | -0.25 | -0.15 | 0.30 | 0.20 | — |
■ ≥ 0.80 same trade■ 0.50–0.79 heavy overlap■ negative — hedges
Risk stacking
These 2 markets move as ~1.1 independent bet. Same-direction positions here stack into one trade against your daily-loss limit — sized 2× larger than you think.
Effective independent bets
1.1
Instruments selected
2
ES · NQ
Avg pairwise correlation
0.90
long-run daily estimate
Model assumptions
- Static long-run estimates of daily-return correlation, rounded to 0.05 — planning numbers, not live data. Correlations spike toward 1 in risk-off events; treat every positive number here as its stressed value on the worst day.
- Effective bets = N² ÷ Σ of the pairwise correlation matrix (equal-weight variance ratio). Equal sizing across instruments is assumed.
- Same-direction positions in correlated markets draw down together — one daily-loss limit absorbs the sum. This is the mechanism behind most "diversified" account blowups.
- Micro contracts track their parent index/commodity at ≈1.0 correlation and are treated as the same instrument.