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.

  1. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  2. Autocorrelation

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

    A statistical measure that attempts to determine the strength ...
  4. Mean

    The simple mathematical average of a set of two or more numbers. ...
  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 Articles
  1. Forex Education

    Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.
  2. Insurance

    The Dangers Of Over-Diversifying Your Portfolio

    If you diversify too much, you might not lose much, but you won't gain much either.
  3. Active Trading

    Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
  4. Investing

    What is Descriptive Statistics?

    Descriptive statistics is the term applied to meaningful data analysis.
  5. Fundamental Analysis

    Create a Monte Carlo Simulation Using Excel

    How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel.
  6. Mutual Funds & ETFs

    Top 4 Inverse Equities ETFs

    Explore analysis of some of the most popular inverse and leveraged-inverse ETFs that track equity indexes, and learn about the suitability of these ETFs.
  7. Forex Fundamentals

    How Foreign Exchange Affects Mergers and Acquisitions Deals

    Learn how foreign exchange rates can impact the flows of international merger and acquisition (M&A) transactions, and understand how deals can impact exchange rates.
  8. Mutual Funds & ETFs

    Finding Lower Risk, Higher Return Mutual Funds

    Discover detailed analysis of lower-risk, higher-return balanced mutual funds, and learn about the characteristics of this type of mutual fund.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares Globl Consumer Discretionary

    Explore analysis of the iShares Global Consumer Discretionary ETF, and learn about the suitability of this fund that tracks the consumer discretionary sector.
  10. Mutual Funds & ETFs

    Top 4 Muni New York Mutual Funds

    Explore detailed analyses of the top four New York municipal bond mutual funds, and learn the type of investor for which these funds are best suited.
  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. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  3. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  4. What are some of the more common types of regressions investors can use?

    The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >>
  5. What types of assets lower portfolio variance?

    Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >>
  6. When is it better to use systematic over simple random sampling?

    Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
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!