🔗 Correlation

Correlation measures the statistic relationship between two assets, indicating whether and how much they tend to vary together.

Correlation is expressed in statistics by the Pearson correlation coefficient (for numerical and linear variables), which takes values between -1 and 1.

+1: perfectly positive correlation (when one variable increases, the other variable also increases proportionally).

-1: perfectly negative correlation (when one variable increases, the other decreases proportionally).

0: no linear correlation (the variables show no direct relationship).

A high correlation indicates that there is a common trend between the variables, but it does not imply causality: knowing that two variables are correlated does not mean that one causes the other.