Probability and Statistics for Finance (Frank J. Fabozzi Series) by Fabozzi & Sergio M. Focardi & Svetlozar T. Rachev & Markus Hoechstoetter

Author:Fabozzi & Sergio M. Focardi & Svetlozar T. Rachev & Markus Hoechstoetter
Language: eng
Format: mobi
ISBN: 9780470906316
Publisher: Wiley
Published: 2010-07-29T16:00:00+00:00

The correlation coefficient given by (14.22) can take on real values in the range of -1 and 1 only. When its value is negative, we say that the random variables X and Y are negatively correlated, while they are positively correlated in the case of a positive correlation coefficient. When the correlation is zero, due to a zero covariance, we refer to X and Y as uncorrelated. We summarize this below:

−1 ≤ ρX ,Y ≤ 1

−1≤ ρX,Y < 0 X and Y negatively correlated

ρX,Y = 0 X and Y uncorrelated

0 < ρX ,Y ≤ 1 X and Y positively correlated

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