Step two is to calculate the Pearson’s correlation coefficient, r, using the formula, the calculated parameters and our sample size (n = 20). In our example, we find Pearson’s correlation coefficient ...

In the above example, Apple and the S&P 500 have a correlation coefficient of 0.73817, which indicates a strong relationship between the two over 90 days of data.

Pearson coefficients range from +1 to -1, with +1 representing a positive correlation, -1 representing a negative correlation, and 0 representing no relationship.

Example of using correlation coefficients Let’s say that you own three stocks, which we’ll call Company A, Company B, and Company C. All three are growth stocks in the technology space .

Figure 3: Effect of noise and sample size on Pearson's correlation coefficient r. ( a ) r of an n = 20 sample of ( X , X + ɛ), where ɛ is the normally distributed noise scaled to standard ...

In this example, we see a perfect Pearson correlation. As the content length decreases, the ranking position steadily increases (gets worse). Each drop of 200 words corresponds to a drop of one ...

Correlation is readily detected through statistical measurements of the Pearson’s correlation coefficient, which indicates how tightly locked together the two quantities are, ranging from -1 ...