Investor Glossary-correlationInvestor Glossary-correlationInvestor Glossary-correlationInvestor Glossary-correlationInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


The HTML to link to this page

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 product-moment 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...

Learn about investing with the Investor Glossary Term of the Day

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

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use