




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


 