Serial Correlation

What is 'Serial Correlation'

The relationship between a given variable and itself over various time intervals. Serial correlations are often found in repeating patterns when the level of a variable effects its future level. In finance, serial correlation is used by technical analysts to determine how well the past price of a security predicts the future price.



The term can also be referred to as "autocorrelation" or "lagged correlation".

BREAKING DOWN 'Serial Correlation'

Because technical analysis is based entirely on a stock's price movement and the associated volume, rather than the company's fundamentals, finding and validating profitable patterns is an essential component of the success one will have using such methods.

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RELATED FAQS
  1. What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy ... Read Answer >>
  2. What are common examples of Serial Correlation in finance?

    Take a deeper look at serial correlation in finance, and find out why most attempts at discovering serial correlation among ... 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 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 >>
  5. 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 >>
  6. How do fund managers use correlation to create portfolio diversity?

    Read about how contemporary investment fund managers use the concept of correlation to add diversification among assets in ... Read Answer >>
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