Correlation Coefficient

AAA

DEFINITION of 'Correlation Coefficient'

A measure that determines the degree to which two variable's movements are associated.

The correlation coefficient is calculated as:

 

Correlation Coefficient

INVESTOPEDIA EXPLAINS 'Correlation Coefficient'

The correlation coefficient will vary from -1 to +1. A -1 indicates perfect negative correlation, and +1 indicates perfect positive correlation.

VIDEO

Loading the player...
RELATED TERMS
  1. Pearson Coefficient

    A type of correlation coefficient that represents the relationship ...
  2. Autocorrelation

    A mathematical representation of the degree of similarity between ...
  3. Copula

    A statistical measure that represents a multivariate uniform ...
  4. Information Coefficient - IC

    A correlation value that measures the relationship between a ...
  5. Coefficient Of Variation - CV

    A statistical measure of the dispersion of data points in a data ...
  6. Statistically Significant

    The likelihood that a result or relationship is caused by something ...
RELATED FAQS
  1. Can the correlation coefficient be used to measure dependence?

    The correlation coefficient can be used to measure the linear dependence between two random variables. The most common correlation ... Read Full Answer >>
  2. What does it mean if the correlation coefficient is positive, negative, or zero?

    The correlation coefficient measures the robustness of the relationship between two variables. Pearson's correlation coefficient ... Read Full Answer >>
  3. The covariance between Stock A and Stock Z is 10.32, while the correlation coefficient ...

    The covariance between Stock A and Stock Z is 10.32, while the correlation coefficient between the two stocks is -0.35. ... Read Full Answer >>
  4. What is the correlation between American stock prices and the value of the U.S. dollar?

    The correlation between any two variables (or sets of variables) summarizes a relationship, whether or not there is any real-world ... Read Full Answer >>
  5. What is the difference between a simple random sample and a stratified random sample?

    Simple random samples and stratified random samples differ in how the sample is drawn from the overall population of data. ... Read Full Answer >>
  6. What are the advantages and disadvantages of using systematic sampling?

    As a statistical sampling method, systematic sampling is simpler and more straightforward than random sampling. It can also ... Read Full Answer >>
Related Articles
  1. Active Trading

    What's the Correlation Coefficient?

    The correlation coefficient is a measure of how closely two variables move in relation to one another. If one variable goes up by a certain amount, the correlation coefficient indicates which ...
  2. Investing Basics

    Diversification: Protecting Portfolios From Mass Destruction

    This investing strategy retains its charm as a protection against random events in the market.
  3. Professionals

    Microsoft Excel Features For The Financially Literate

    Here are some of Excel's functions and features that a financial professional can use to make his or her job more efficient.
  4. Forex Education

    Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.
  5. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  6. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  7. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  8. Fundamental Analysis

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  9. Economics

    What is Systematic Sampling?

    Systematic sampling is similar to random sampling, but it uses a pattern for the selection of the sample.
  10. Fundamental Analysis

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center