Glossary term

Correlation

How closely two series move together.

Correlation ranges from -1 to +1. Positive means two things tend to move together; negative means they tend to move in opposite directions; near zero means little linear relationship.

Example: A negative one-day correlation between today's return and tomorrow's return is evidence of reversal.

Where this appears

Systematic momentum: what to look at Short-term reversal: real but hard to trade