Biomolecular interactions are fundamental to the vast majority of cellular processes, and identification of the major interacting components is usually the first step toward an understanding of the mechanisms that govern various cell functions. Thus, statistical image analyses that can be performed on fluorescence microscopy images of fixed or live cells have been routinely applied for biophysical and cell biological studies. These approaches measure the fraction of interacting particles by analyzing dual color fluorescence images for colocalized pixels. Colocalization algorithms have proven to be effective, although the dynamic range and accuracy of these measurements has never been well established. Spatial image cross-correlation spectroscopy (ICCS), which cross-correlates spatial intensity fluctuations recorded in images from two detection channels simultaneously, has also recently been shown to be an effective measure of colocalization as well. Through simulations, imaging of fluorescent antibodies adsorbed on glass and cell measurements, we show that ICCS performs much better than standard colocalization algorithms at moderate to high densities of particles, which are often encountered in cellular systems. Furthermore, it was found that the density ratio between the two labeled species of interest plays a major role in the accuracy of the colocalization analysis. By applying a direct and systematic comparison between the standard, fluorescence microscopy colocalization algorithm and spatial ICCS, we show regimes where each approach is applicable, and more importantly, where they fail to yield accurate results.