Description

• A statistical calculation which shows relation between two data series, an independent data and another dependent data
• Its value lies between -1 to 1. 0 means that there is no correlation and 1 means they 100% correlated. -1 means that they are negative correlated
• Relation can be between prices of a stock to another stock, index or may be price to indicator

Interpretation

• Low value say, < +-0.2 means that there is very low relation between the two data series and effect of independent variable is insignificant on dependent variable
• High coefficient value say, > 0.5 (irrespective of +- sign) means that influence of independent variable on dependent is high. Change in it will affect dependent variable also
• If Correlation Coefficient (CC) is positive value means that dependent will move in same direction as independent variable
• If CC is negative value means that dependent will move in

For eg. A slope rises when it is above 20-day SMA and falls when it is below it

Default Parameters Used/Inputs

• Close Line 1
• Close Line 2
• Bars

Returns/Output

Correlation Coefficient values of stock for the specified period

Formula

Cov= ∑((X-X)*(y-Y)/n) Cor=Cov/σX*σY where, Cov = covariance between the two variable