How to Calculate Correlation . There are several methods of calculating correlation. The most common method, the Pearson product-moment correlation, is discussed further in this article.

Thus, if we calculate the correlation coefficient including this outlier, it would suggest a weaker correlation between the stock and the S&P 500 than actually exists on most trading days.

You can use several methods to calculate correlation in Excel. Understanding Correlation. The correlation coefficient ranges from -1 to 1. Exactly 1 is considered perfect.

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The article How to Calculate Beta From Volatility and Correlation originally appeared on Fool.com. Try any of our Foolish newsletter services free for 30 days .