How to Calculate Stock Correlation Coefficient
Gather stock returns.. Calculate the mean. Calculate the covariance
Steps
1
Gather stock returns.
Gather stock returns.
2
Calculate the mean
Calculate the mean
3
Calculate the covariance
Calculate the covariance
4
Calculate the variance
Calculate the variance
5
Find the standard deviation.
Find the standard deviation.
6
Set up your correlation coefficient equation.
Set up your correlation coefficient equation.
7
Solve for the correlation coefficient.
Solve for the correlation coefficient.
8
Calculate R-squared.
Calculate R-squared.
9
Understand your correlation coefficient result.
Understand your correlation coefficient result.
10
Reduce risk in your portfolio.
Reduce risk in your portfolio.
11
Expand your analysis to other assets.
Expand your analysis to other assets.
12
Plot the pairs
Plot the pairs
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