Studies Calculations

Correlation (Cor)

Overview

What is Correlation?

Correlation is used to find and describe the relationship between variables, and to allow prediction of one variable from another (or others).  The result of the calculation gives an index of the relationship between variables.  The index can vary: from +1.00 = perfect positive correlation, through 0.00 = no relationship, to -1.00 = perfect negative correlation.

Formula

Where:

n is the number of periods in the summation.

x represents one symbol series and y represents the other

Assumptions  

• linear relationship between x and y

• continuous random variables

• both variables must be normally distributed

• x and y must be independent of each other

Parameters

The price series (close values for x), the comparison symbol y, and the period n are configurable input parameters.