One of the main goals of correlation analysis is to identify and quantify the relationship between two variables. This relationship could vary from having a full dependency or linear relationship between the two, to complete independence. One of the most popular methods for measuring the level of correlation between two variables is the Pearson correlation coefficient. Although this method is not necessarily the most appropriate one for time series data, it is a simple and intuitive representative of the statistical logic beyond most of the methods for measuring correlation. This method, also known as the population correlation coefficient, is a ratio between the covariance of two variables and the multiplication of their standard deviation:
The values of the correlation coefficient segment the level of correlation into three main groups:
- Positively...
