Correlation coefficient
Correlation coefficient, ρ (rho), is a standardized measure of how two random variables co-vary. A correlation coefficient (ρ) of +1.0 means that the two variables move up and down in perfect synchronization, whereas a coefficient of −1.0 means the variables always move in opposite directions. A correlation coefficient of zero suggests that the two variables are not related to one another; that is, they are independent.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Correlation coefficient, ρ (rho). A standardized measure of how two random variables co-vary. A correlation coefficient (ρ) of +1.0 means that the two variables move up and down in perfect synchronization, whereas a coefficient of −1.0 means the variables always move in opposite directions. A correlation coefficient of zero suggests that the two variables are not related to one another; that is, they are independent.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
