Understanding Euclidean Distance and Its Applications in Trading Algorithms
· 5 min read
Introduction
Euclidean distance is not just a mathematical concept but a crucial tool for data analysis in various fields, including trading and quantitative finance. In algorithmic trading, Euclidean distance can be applied to evaluate the similarity between financial assets, identify trading signals, and optimize portfolio allocation. As a distance metric, it helps in quantifying the relationship between different financial data points, allowing for more effective trading strategies.
In this article, we will discuss what Euclidean distance is, how it's calculated, and where it fits in the world of financial markets and algorithmic trading.