The correlation of X and Y is the normalized covariance: Corr(X,Y) = Cov(X,Y) / σ X σ Y. The correlation of a pair of random variables is a dimensionless number, ranging between +1 and -1. It is +1 ...

Uses of Covariance . Covariance can tell how the stocks move together, but to determine the strength of the relationship, look at their correlation.The correlation should, therefore, be used in ...

Correlation coefficients are used in science and finance to assess the degree of association between two variables, factors, or data sets. For example, as high oil prices are favorable for crude ...

Understanding Correlation And Covariance. And What It Means For Your Portfolio. Jan. 27, 2012 11:53 AM ET. The Better Investor's Blog. 16 Followers. Follow.

The covariance of X and Y is the difference between the mean product and the product of the means: Cov(X,Y) = E[XY] - E[X]×E[Y]. In the examples above, the respective covariances are 1.25, ...