Sidebar: Calculating Offset Correlation, OSC1 by Norman J. Brown
The well-known Pearson’s correlation coefficient r relates two series of parameters and yields a measure of the “likeness” of those two series. It can be informative in comparing two mutual funds to see how similar they are to each other. Another way to use r is to compare one fund to itself by entering the rate of change (ROC) of the fund in column X and the same ROC in column Y, delayed one day (dropped down one cell in Excel). Using the Excel “CORREL” command (or for graphs, displaying a trendline) will result in an r coefficient that offers a comparison between the X
series and Y series.