




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


 