Negative Correlation

AAA

DEFINITION of 'Negative Correlation'

A relationship between two variables in which one variable increases as the other decreases, and vice versa. In statistics, a perfect negative correlation is represented by the value -1.00, while a 0.00 indicates no correlation and a +1.00 indicates a perfect positive correlation. A perfect negative correlation means that the relationship that appears to exist between two variables is negative 100% of the time. It is also possible that two variables may be negatively correlated in some, but not all, cases.

INVESTOPEDIA EXPLAINS 'Negative Correlation'

Here are a few examples of a negative correlation: The more time I spend at the mall, the less money I have in my checking account. The higher my mutual fund's expense ratio, the lower my investment returns. The more hours I spend at the office, the less time I spend with my family.

VIDEO

Loading the player...
RELATED TERMS
  1. Inverse Correlation

    A contrary relationship between two variables such that they ...
  2. Positive Correlation

    A relationship between two variables in which both variables ...
  3. Correlation

    In the world of finance, a statistical measure of how two securities ...
  4. Cross-Correlation

    A statistical measure timing the movements and proximity of alignment ...
  5. Covariance

    A measure of the degree to which returns on two risky assets ...
  6. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
RELATED FAQS
  1. How are negative correlations used in risk management?

    Negative correlation is a statistical measure used to describe a relationship between two variables. When two variables are ... Read Full Answer >>
  2. What is the difference between positive correlation and inverse correlation?

    In the field of statistics, positive correlation describes the relationship between two variables which change together, ... Read Full Answer >>
  3. How should I interpret a negative correlation?

    A negative correlation between two variables means that one variable increases whenever the other decreases. This relationship ... Read Full Answer >>
  4. Does a negative correlation between two stocks mean anything?

    Negative correlation with regard to stocks means two individual stocks have a statistical relationship such that they generally ... Read Full Answer >>
  5. Why is there a negative correlation between quantity demanded and price?

    The law of demand is an economic principle that explains the negative correlation between the price of a good or service ... Read Full Answer >>
  6. 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 >>
  7. Are oil prices and interest rates correlated?

    Yes. No. Maybe. Definitely. There's no easy answer to this question. While many theories abound, the reality is that oil ... Read Full Answer >>
  8. 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 >>
  9. Is there a correlation between inflation and house prices?

    There is a correlation between inflation and house prices - in fact there are correlations between inflation and any good ... Read Full Answer >>
  10. What is the relationship between oil prices and inflation?

    The price of oil and inflation are often seen as being connected in a cause and effect relationship. As oil prices move up ... Read Full Answer >>
Related Articles
  1. Investing

    Correlation

    In the world of finance, correlation is a statistical measure of how two securities move in relation to each other.
  2. Fundamental Analysis

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  3. Economics

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  4. Investing Basics

    What Does a Financial Intermediary Do?

    A financial intermediary is an institution that acts as a go-between in a financial transaction.
  5. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  6. Economics

    Explaining Demographics

    Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment.
  7. Fundamental Analysis

    Calculating Degree of Financial Leverage

    Degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure.
  8. Economics

    What Does Capital Intensive Mean?

    Capital intensive refers to a business or industry that requires a substantial amount of money or financial resources to engage in its specific business.
  9. Fundamental Analysis

    Calculating the Present Value of an Annuity

    The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate.
  10. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!