Positive Correlation

Loading the player...

What is 'Positive Correlation '

Positive correlation is a relationship between two variables in which both variables move in tandem. A positive correlation exists when as one variable decreases, the other variable also decreases and vice versa. In statistics, a perfect positive correlation is represented by the value +1.00, while a 0.00 indicates no correlation and a -1.00 indicates a perfect negative correlation.

BREAKING DOWN 'Positive Correlation '

Here are a few simple examples of a positive correlation: The more money I save, the more financially secure I feel. The longer I invest, the more compound interest I earn. The less time I spend marketing my business, the fewer new clients I acquire. The more years of education I complete, the higher my earning potential.

A perfect positive correlation means that 100% of the time, the relationship that appears to exist between two variables is positive. It is also possible for two variables to be positively correlated in some, but not all, cases.

RELATED TERMS
  1. Negative Correlation

    A relationship between two variables in which one variable increases ...
  2. Inverse Correlation

    A contrary relationship between two variables such that they ...
  3. Correlation

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

    A measure that determines the degree to which two variable's ...
  5. Serial Correlation

    The relationship between a given variable and itself over various ...
  6. Cluster Analysis

    An investment approach that places securities into groups based ...
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. Products and Investments

    4 Reasons Why Market Correlation Matters

    Learn about how correlation can be used to measure how broader markets move in relation to each other. See how correlation is used to manage risk.
  3. Trading Strategies

    Is the Stock Correlation Strategy Effective?

    The synchronized movement among stocks and markets in recent years is challenging diversification.
  4. Trading Strategies

    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. 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 ...
  6. Economics

    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. Forex Education

    GBP/USD: Trading The "Cable"

    Known as "trading the cable", this pairing has its advantages.
  8. Economics

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  9. Technical Indicators

    Explaining Autocorrelation

    Autocorrelation is the measure of an internal correlation with a given time series.
  10. Forex Education

    EUR/USD

    Trading the euro with the U.S. dollar has many advantages due to its correlation with other currencies.
RELATED FAQS
  1. Does a negative correlation between two stocks mean anything?

    Learn what the concept of negative correlation means, understand how it is generally calculated and see how it is used in ... Read Answer >>
  2. How should I interpret a negative correlation?

    Learn more about correlation and how businesses analyze variables. Find out how negative correlations are interpreted by ... Read Answer >>
  3. How do I find positive correlation in the stock market?

    Learn how positive correlation is found in the stock market, how correlation is calculated and how positive correlation is ... Read Answer >>
  4. How do I calculate correlation between market indicators and specific stocks?

    Discover how to calculate the correlation coefficient between market indicators and stock prices, a critical skill in technical ... Read Answer >>
  5. What is the difference between positive correlation and inverse correlation?

    Learn the difference between a positive correlation and a negative, or inverse, correlation and the way they apply to the ... Read Answer >>
  6. How can you calculate correlation using Excel?

    Find out how to calculate the Pearson correlation coefficient between two data arrays in Microsoft Excel through the CORREL ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center