Correlation analysis

Financial Analytics in Google Sheets

David Ardia

Professor in Quantitative Methods for Finance

Correlation analysis

• What happened to stock ABC when the US market increased?

• Can you associate any pattern in their co-movements?

• The correlation coefficient can help you identify this type of relationship

Correlation coefficient

• A statistical measure that quantifies the degree to which two variables move together

  • Return of ABC linked to return of the market index?

Correlation coefficient

Correlation coefficient

Correlation coefficient

Function CORREL()

Function CORREL()

Function PEARSON()

Correlation changes over time

• Typically observed during crisis periods, where:

Correlation changes over time

• Typically observed during crisis periods, where:

Correlation changes over time

• Typically observed during crisis periods, where:

Correlation changes over time

• Typically observed during crisis periods, where:

Rolling-window correlation analysis

Rolling-window correlation with Google Sheets

Rolling-window correlation with Google Sheets

Rolling-window correlation with Google Sheets

It's time to practice!

Financial Analytics in Google Sheets