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.

For example, when two stocks move in the same direction, the correlation coefficient is positive. Conversely, when two stocks move in opposite directions, the correlation coefficient is negative.

Thus, if we calculate the correlation coefficient including this outlier, it would suggest a weaker correlation between the stock and the S&P 500 than actually exists on most trading days.

Negative Correlation: How it Works, Examples And FAQ. Story by Elvis Picardo • 1y. Understanding a Key Tool in Diversifying Your Portfolio. ... In a line graph, you would see a downward slope.

Correlation analysis in portfolio management design is overrated. ... For example, from 1926 to 2013, the correlation between the US stock market and 5-year Treasury note monthly returns has been ...