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technical_indicators:correlation_coeffici [2019/06/24 19:38] 127.0.0.1 external edit |
technical_indicators:correlation_coeffici [2023/02/06 15:50] jayanthi |
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| The Correlation Coefficient is a statistical measure that reflects the correlation between two securities. In other words, this statistic tells us how closely one security is related to the other. The Correlation Coefficient is positive when both securities move in the same direction (up or down) and negative when the two securities move in opposite directions. Determining the relationship between two securities is useful for analyzing intermarket relationships, sector-stock relationships and sector-market relationships. This indicator can also help investors diversify by identifying securities with a low or negative correlation to the stock market. | The Correlation Coefficient is a statistical measure that reflects the correlation between two securities. In other words, this statistic tells us how closely one security is related to the other. The Correlation Coefficient is positive when both securities move in the same direction (up or down) and negative when the two securities move in opposite directions. Determining the relationship between two securities is useful for analyzing intermarket relationships, sector-stock relationships and sector-market relationships. This indicator can also help investors diversify by identifying securities with a low or negative correlation to the stock market. | ||
| - | ===== Calculation ===== | + | ===== How Correlation Coefficient Is Calculated ===== |
| The calculation for the Correlation Coefficient is rather complicated, so feel free to skip this section. We will simply look at the basics to see some of the method behind the madness. This indicator is right at the heart of classical statistics. The first step is to select two securities. In this example, we will be using Intel (INTC) and the Nasdaq 100 ETF (QQQ). Namely, we want to see the degree of correlation between Intel and QQQ. The Excel table below lays out the groundwork. | The calculation for the Correlation Coefficient is rather complicated, so feel free to skip this section. We will simply look at the basics to see some of the method behind the madness. This indicator is right at the heart of classical statistics. The first step is to select two securities. In this example, we will be using Intel (INTC) and the Nasdaq 100 ETF (QQQ). Namely, we want to see the degree of correlation between Intel and QQQ. The Excel table below lays out the groundwork. | ||
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| - | For more details on the syntax to use for Correlation scans, please see our [[docs>scans:indicators#correlation_coefficient|Scanning Indicator Reference]] in the Support Center. | + | For more details on the syntax to use for Correlation scans, please see our [[https://support.stockcharts.com/doku.php?id=scans:indicators#correlation_coefficient|Scanning Indicator Reference]] in the Support Center. |