Pearson Coefficient

DEFINITION of 'Pearson Coefficient'

A type of correlation coefficient that represents the relationship between two variables that are measured on the same interval or ratio scale.

BREAKING DOWN 'Pearson Coefficient'

Numerically, the Pearson coefficient is represented the same way as a correlation coefficient that is used in linear regression; ranging from -1 to +1. A value of +1 is the result of a perfect positive relationship between two or more variables. Conversely, a value of -1 represents a perfect negative relationship. It has been shown that the Pearson coefficient can be deceptively small when it is used with a non-linear equation.

RELATED TERMS
  1. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  2. Information Coefficient - IC

    A correlation value that measures the relationship between a ...
  3. Coefficient of Determination

    A measure used in statistical model analysis to assess how well ...
  4. Berry Ratio

    The ratio of a company's gross profits to operating expenses. ...
  5. Benchmark For Correlation Values

    A benchmark or point of reference chosen by an investment fund ...
  6. Inverse Correlation

    A contrary relationship between two variables such that they ...
Related Articles
  1. 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

    Calculating the Coefficient Of Variation (CV)

    Coefficient of variation measures the dispersion of data points around the mean, a statistical average.
  3. Trading

    Correlation

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

    Pairs Trading: Correlation

    Correlation is a term from linear regression analysis that describes the strength of the relationship between a dependent variable and an independent variable. Central to pairs trading is the ...
  5. Investing

    Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.
  6. Markets

    Understanding the Oil & Gas Price Correlation

    Learn how the correlation between the commodity prices for natural gas and oil changed from 2004 to 2015 due to increased natural gas production.
  7. ETFs & Mutual Funds

    ETF Case Study: Do Utilities ETFs Protect in Down Markets? (XLU, VPU)

    Explore the historical performance of large utilities ETFs relative to market indexes during bear markets to find out if utilities ETFs provide downside protection.
  8. Retirement

    Valeant News: Michael Pearson's Return, Sort of

    Explore the circumstances surrounding Michael Pearson’s leave of absence from Valeant, as well as the details of his short-lived return.
  9. Markets

    Explaining Linear Relationships

    A linear relationship describes the proportionality between an independent variable and a dependent variable.
  10. Insights

    Valeant's Outgoing CEO Gets $9M Severance and More (VRX)

    J. Michael Pearson, CEO of Valeant until May 2, will receive a $9 million severance payment. Valeant's stock has fallen 90% since it peaked in August.
RELATED FAQS
  1. Can the correlation coefficient be used to measure dependence?

    Understand the coefficient of correlation and its use in determining the relationship between two variables through the concepts ... Read Answer >>
  2. What does a negative correlation coefficient mean?

    Discover the meaning of a negative correlation coefficient, how this compares to other correlation coefficients and examples ... Read Answer >>
  3. What does it mean if the correlation coefficient is positive, negative, or zero?

    Learn what the correlation coefficient between two variables is and what positive, negative and zero correlation coefficients ... Read Answer >>
  4. What is the difference between a copay and a deductible?

    Learn how the correlation coefficient may be used to predict the relationship between the returns of two stocks, but also ... Read Answer >>
  5. 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 Answer >>
  6. Which of the following statements is (are) true with respect to the coefficient ...

    The correct answer is: c) (I) is incorrect because coefficient of determination will always be positive, whereas correlation ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center