




In statistics, correlation is an assessment of the extent of linear relationship between two variables. A correlation coefficient is the index of the extent of the linear relationship. The most common correlation coefficient is the Pearson productmoment correlation, defined as the covariance of the two variables divided by the product of their standard deviations. The Pearson correlation coefficient is always between 1 and 1. The weaker the relationship, the closer the correlation coefficient is to 0. A positive correlation coefficient indicates a higher value for one variable tends to correspond to a higher value for the other, and a negative correlation coefficient indicates a higher value for one variable tends to correspond to a lower value for the other. Correlation is not an appropriate statistical technique for categorical data such as gender or color. In contrast, correlation is an extremely useful technique for prices. Correlation of stock prices is a simple yet informative analysis. If two stocks have a high correlation, their prices tend to rise and fall in sync.
Rate this correlation definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: stock market close, 1031 exchange, risk management, exdividend date, average price per share, Zero Cost Collar, 1035 exchange, implied volatility, option premium, inflation, debt service coverage, real GDP, phantom income, class C shares, labor relations, current ratio, covered put, irrevocable trust, annual return, exdividend, FICO score, APR, Key Rate Duration, margin rate, FTSE, command economy, LIBOR, 144a, stock split, open position, dividends payable, balance sheet, reverse mortgage, VIX, liquidity ratio, EBITDA, 401a, required rate of return, deferred revenue, diluted share, per diem, minority interest, in escrow, retained earnings, whollyowned subsidiary, deferred tax, cancelled check, limit order, quality assurance


 