4 ms·
Correlation: A Misunderstood Concept in Finance
- addcommitpush 3y agoThe linked Google sheets computes the correlation between the _first difference of_ series 1 and the _first difference_ of series 2, and not the correlation between the series 1 and the series 2. Correlation is indeed misunderstood by the author. > In the chart above, Series 1 and Series 2 are both increasing every day together in the same direction, yet they are perfectly negatively correlated. "Perfectly negatively correlated" as in the correlation is ... 0.982306684.