Timeline for How to interpret difference in correlation coefficient between 'absolute value' correl and 'returns' correl?
Current License: CC BY-SA 3.0
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| Apr 26, 2018 at 10:58 | comment | added | user30978 | Yes, something like that! correlation measures the degree of (linear) co-movement between series. If the series seem to move together on levels but on returns they seem uncorrelated, it may be the case that there is something that moves both series on the levels, but does not affect their returns - i.e a trend or a variable that affects only their mutual trend. Alternatively, this could be evidence of spurious correlation. | |
| Apr 26, 2018 at 10:38 | comment | added | NPJobs | Thanks a lot for your reply! Yes, I understand your point regarding scenario 1 - from a purely technical perspective. But I'm still unable to condense it down into an intuitive understanding. Can it be inferred that A and B do not impact each other but rather there is a common trend/another variable responsible for their movement in the same direction? | |
| Apr 26, 2018 at 10:33 | history | edited | Greenparker | CC BY-SA 3.0 |
added 96 characters in body
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| Apr 26, 2018 at 9:57 | review | First posts | |||
| Apr 26, 2018 at 10:33 | |||||
| Apr 26, 2018 at 9:57 | history | answered | user30978 | CC BY-SA 3.0 |