Correlation is a statistical measurement of how similarly one investment behaves in relation to another. Correlation is used in advanced portfolio management.

Correlation ranges from -1 to 1. When correlation between two investments is 1, this is perfect correlation and it implies that as one security moves, either up or down the other security will move in lockstep, in the same direction. Negative correlation implies two investments are inversely related so when one investment goes up the other goes down.

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Correlation Formula

Correlation vs Cointegation
Cointegation and correlation are different things: cointegration is about the long-term behavior of prices of two or more stocks, while correlation is about short-term behavior of their returns.