Correlation: Difference between revisions
WikiSysopIG (talk | contribs) Created page with "'''Correlation''' is a statistical measure of the degree to which two variables move together. In finance, correlation is commonly used to measure the strength and direction of the relationship between the returns of two assets. The Pearson correlation coefficient is commonly used to measure linear correlation. A correlation coefficient ranges from −1 to +1: <math> -1\leq\rho_{XY}\leq1 </math> where: * <math>\rho_{XY}=+1</math> indicates perfect positive l..." |
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The correlation term affects the amount of diversification achieved by combining the assets. | The correlation term affects the amount of diversification achieved by combining the assets. | ||
==Correlation and diversification== | ==Correlation and diversification== | ||