Pearson's Correlation Coefficient

Correlation (r) is one of the components derived from regression analysis between a security and an Index. It is often known as Pearson’s Correlation Coefficient as the technique was developed by Karl Pearson in the 1880s. You can read more about regression analysis here. In regression analysis, the regression line is the “line of best fit” between all the observations. The spread of those observations around the regression line is the measure of correlation.

This is a companion discussion topic for the original entry at