This is not a directional indicator nor is moving covariance. This is used for forecasting . This must be used in conjunction with moving covariance.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
//Moving Co-Covariance study(title="Co-Covariance", shorttitle="MCCV", overlay=false) src = vwap, len = input(30, minval=1, title="covariance length"), len2 = input(7, minval=1, title="Co-covariance look back length") mean = vwma(src, len) stdev = stdev(src, len) covariance = (stdev/mean) covariancemean = vwma(covariance, len2) cstdev = stdev(covariance, len2) cocovariance = (cstdev/covariancemean) plot(cocovariance, title="covariance on covariance", style = line, color = aqua)