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correlation

 - 5 dictionary results

cor⋅re⋅la⋅tion

  [kawr-uh-ley-shuhn, kor-]
Use correlation in a Sentence
–noun
1. mutual relation of two or more things, parts, etc.
2. the act of correlating or state of being correlated.
3. Statistics. the degree to which two or more attributes or measurements on the same group of elements show a tendency to vary together.
4. Physiology. the interdependence or reciprocal relations of organs or functions.
5. Geology. the demonstrable equivalence, in age or lithology, of two or more stratigraphic units, as formations or members of such.
Also, especially British, corelation.

Origin:
1555–65; < ML correlātiōn- (s. of correlātiō). See cor-, relation

Related forms:
cor⋅re⋅la⋅tion⋅al, adjective
Dictionary.com Unabridged
Based on the Random House Dictionary, © Random House, Inc. 2009.
Cite This Source Link To correlation
cor·re·la·tion   (kôr'ə-lā'shən, kŏr'-)   
n.  

  1. A causal, complementary, parallel, or reciprocal relationship, especially a structural, functional, or qualitative correspondence between two comparable entities: a correlation between drug abuse and crime.

  2. Statistics The simultaneous change in value of two numerically valued random variables: the positive correlation between cigarette smoking and the incidence of lung cancer; the negative correlation between age and normal vision.

  3. An act of correlating or the condition of being correlated.


[Medieval Latin correlātiō, correlātiōn- : Latin com-, com- + Latin relātiō, relation, report (from relātus, past participle of referre, to carry back; see relate).]
cor're·la'tion·al adj.
The American Heritage® Dictionary of the English Language, Fourth Edition
Copyright © 2009 by Houghton Mifflin Company.
Published by Houghton Mifflin Company. All rights reserved.
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Word Origin & History

correlation 
1561, from M.Fr. corrélation, from com- "together" + relation (see relation).
Online Etymology Dictionary, © 2001 Douglas Harper
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Financial Dictionary

Correlation

In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management.

Investopedia Commentary

Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities is said to have no correlation, it is completely random. If one security moves up or down there is as good a chance that the other will move either up or down, the way in which they move is totally random.

In real life however you likely will not find perfectly correlated securities, rather you will find securities with some degree of correlation. For example, the performance of two stocks within the same industry is strongly positively correlated although it may not be exactly +1.

Related Links

The Dangers of Over-Diversification
Financial Concepts
Asset Allocation Strategies

See also: Correlation Coefficient, Covariance, Diversification, Modern Portfolio Theory, Portfolio Management, Portfolio Manager, Standard Deviation

Also spelled: co-relation

Investopedia.com. Copyright © 1999-2005 - All rights reserved. Owned and Operated by Investopedia Inc.
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Financial Dictionary

correlation

The relationship between two variables during a period of time, especially one that shows a close match between the variables' movements. For example, all utility stocks tend to have a high degree of correlation because their share prices are influenced by the same forces. Conversely, gold stock price movements are not closely correlated with utility stock price movements because the two are influenced by very different factors. The concept of correlation is frequently used in portfolio analysis. See also serial correlation.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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