We will use the Pearson Correlation Coefficient to determine the two assets’ correlation. This method, one of the most popular for measuring the linear relationship between two variables, will help us understan
The correlation coefficient is a value that indicates the strength of the relationship between variables. The coefficient can take any values from -1 to 1. The interpretations of the values are: -1:Perfect negative correlation. The variables tend to move in opposite directions (i.e., when one...
Definition:The correlation coefficient, also commonly known as Pearson correlation, is a statistical measure of the dependence or association of two numbers. When two sets of numbers move in the same direction at the same time, they are said to have a positive correlation. When one series of n...
Describe what is meant by the term "correlation coefficient." Give an example of how correlation is used in the "real world." Use your example to discuss whether or not correlation implies causation. Cite the sources used (if any).
Close inspection shows that the slopes defined by the two high points start out negative, become positive, and then become negative again over the course of the chart. The range chart suggests some correlation in subgroup variabilities for issues and clearings. The X-bar chart suggests a ...
If the value of r is less than zero, there is a negative or inverse correlation. Thus, a decrease in the first variable will result in an increase in the second variable. When plotted on a diagram, a positive correlation will see a line which slopes downwards from left to right and a...
Answer to: As the age of your car increases, the value of that car decreases. This is an example of positive correlation. (a) True (b) False By...
Correlation Matrix:The correlation matrix is a table that represents the values of correlation coefficients for different variables. It shows a numeric value of the correlation coefficient for all the possible combinations of the variables. It is used when determining the relationship between more than...
Technically, to hedge requires you to make offsetting trades in securities with negative correlations. Of course, you still have to pay for this type of insurance in one form or another. For instance, if you have long shares of the XYZ corporation, you can buy aput optiontoprotect your in...
If the value ofris close to +1, it indicates a strong positive correlation, and ifris close to -1, it denotes a strong negative correlation. How to use PEARSON Function in Excel? To understand the uses of the PEARSON function, let’s consider an example: ...