V.6:4 (157-159): SIDEBAR: Coefficient of Correlation

V.6:4 (157-159): SIDEBAR: Coefficient of Correlation
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Coefficient of Correlation

Correlation is a measure of the degree of relationship between two series. When odd lot shorts are rising, is the Dow usually rising? When odd lot shorts are declining, is the Dow usually declining? Or is the reverse usually the case? Instead, is the relationship weak or nonexistent?

The correlation coefficient (r) varies between +1 and -1. If it is close to +1, the two series are in close agreement. If it is close to -1 when one series is rising, the other is declining. If the coefficient is close to zero, there is no evident relationship. Here is a suggested interpretation:

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