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 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 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 >>
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