← Glossary

Correlation coefficient

A correlation coefficient near +1 means two series tend to move up and down together, near −1 means they tend to move in opposite directions, and near 0 means little to no linear relationship between them. It measures association, not cause — and with only a small number of data points, a correlation coefficient can look meaningfully positive or negative by chance alone.

This explains what correlation coefficient measures. It isn't investment advice — see the disclaimer.