Step two is to calculate the Pearson’s correlation coefficient, r, using the formula, the calculated parameters and our sample size (n = 20). In our example, we find Pearson’s correlation coefficient ...

Pearson coefficients range from +1 to -1, with +1 representing a positive correlation, -1 representing a negative correlation, and 0 representing no relationship.

In the above example, Apple and the S&P 500 have a correlation coefficient of 0.73817, which indicates a strong relationship between the two over 90 days of data.

Figure 1: The results of multiple linear regression depend on the correlation of the predictors, as measured here by the Pearson correlation coefficient r (ref. 2). ( a ) Simulated values of ...