Volume-price divergence
factor.formula
Calculation of volume-price divergence:
In the formula:
- :
Represents the Pearson Correlation Coefficient, which is used to measure the strength of the linear correlation between two variables. Its value is between -1 and 1, where -1 indicates a perfect negative correlation, 1 indicates a perfect positive correlation, and 0 indicates no linear correlation.
- :
Represents the volume weighted average price (VWAP) time series from time t-d to time t. VWAP can reflect the average transaction cost during this period and can effectively smooth short-term price fluctuations. Among them, t represents the current time point, and d represents the length of the lookback time window (such as 10 days, 20 days).
- :
It represents the time series of trading volume from time t-d to time t, reflecting the market activity during this period. Trading volume is an important indicator of market sentiment and participation, and its changes often precede prices.
factor.explanation
The volume-price divergence quantifies the degree of price-volume divergence by calculating the Pearson correlation coefficient between the volume-weighted average price (VWAP) time series and the volume (VOLUME) time series within a specified time window. When the correlation coefficient is positive, it means that the price and volume change in the same direction and the market momentum is strong; while a negative value indicates that the price and volume change in the opposite direction and a divergence occurs. For example, when the price continues to rise but the volume decreases, the correlation coefficient is negative, indicating that the price increase may lack the support of the volume, and there is a "cold field" phenomenon, indicating that the price increase momentum may weaken or there is a potential risk of a callback. Investors can use this indicator in combination with other technical analysis tools, such as trend lines, support and resistance levels, etc., to assist in judging the reliability and potential risks of market trends, especially in the identification of market reversal signals. It has a certain reference significance. It should be noted that this indicator should not be used alone, but should be combined with the overall market environment and the specific situation of individual stocks for comprehensive analysis.