Description

• R square is a statistical measure which shows the relation between a variable and its linear regression trend line
• It was introduced in stock market to see strength of trend confirmed by other indicator
• Its value ranges from 0 to 1

Interpretation

• It relates the movement of price with time to show their linear relationship or correlation
• Higher Rsquare value means that price trend of the stock can be linked linear regression
• Lower Rsquare value less than 0.3 means that stock is moving randomly without being in a trend

Default Parameters Used/Inputs

• Close Line 1
• Close Line 2
• Bars

Returns/Output

Squared values of stock for the specified period

Formula

r2(X,Y) = [ Cov(X,Y) ] / [ StdDev(X) x StdDev(Y) ]
where, Cov = Covariance between x, y
Cov = ∑ [(x – mean(x) * ( y – Mean(y)] / n