 | 
Covariance and correlation are closely related
parameters that indicate the extent to which two
random variables co-vary. Suppose there are two
technology stocks. If the price of one rises,
the price of the other is also likely to rise.
If the price of one falls, the price of the other
is also likely to fall. The two prices tend to
co-vary. They have positive covariance and
positive correlation.
Covariance
| | 
Covariance and correlation are closely related
parameters that indicate the extent to which two
random variables co-vary. Suppose there are two
technology stocks. If the price of one rises,
the price of the other is also likely to rise.
If the price of one falls, the price of the other
is also likely to fall. The two prices tend to
co-vary. They have positive covariance and
positive correlation.
Correlation
|