Correlation

Overview

The Stock Rover Correlation Facility shows the correlation between all the individual holdings of the portfolios or watchlists selected on the left. In addition to portfolios and watchlists, you can add additional tickers for correlation analysis via the add quote box. You can add anything that Stock Rover can price to the correlation table. This includes stocks, indices, ETFs, mutual funds, portfolios and watchlists. The portfolios or watchlists that are selected on the left will be added as rows and columns, in addition to the stocks that comprise those portfolios or watchlists.

Correlation is a statistical relationship between asset prices. It is represented by a coefficient that measures, on a scale of -1 to 1, how likely it is that the price of two assets will move together—that is, how likely it is that they’ll both go up or that they’ll both go down. If two assets have a correlation value of 1, this means that they have perfect positive correlation—they move in the same direction and in the same proportion 100% of the time. Perfect negative correlation has a value of -1, and it would mean that the assets move in opposite directions in the same proportion 100% of the time. A correlation value of 0 means that the assets move together 50% of the time. In other words, they are equally likely to move together as they are to move in opposite directions.

Stock Rover’s correlation computation use the daily dividend adjusted price change percentage of an equity, ETF, mutual fund, portfolio or watchlist.

To learn more about correlation, be sure to check out our blog post What is Correlation and Why Does it Matter.

Correlation can be accessed from the Portfolio Manager window, as shown in the screenshot below.

Correlation

Selecting Tickers to Correlate

Items can be selected in the left hand panel as seen below. You can select Portfolios, Watchlists, or items under Quotes. New tickers can also be added in the add quote box seen below.

Correlation

Setting The Time Period

The time period for correlation can also be adjusted as highlighted below in the screenshot. A custom time period can be entered on the right hand side or a predefined time can be selected on the left.

Correlation

Filtering

You can filter the correlation grid by correlation value with the ‘Filter’ button. Entering in a value will only show the correlations that pass that filter.

Correlation

The Heat Map

If the ‘Heat Map’ box is checked (circled below), positive correlations will appear in gradations of red, while negative gradations will appear in gradations of blue. If you mouseover a correlation number, a tooltip will display the corresponding two stocks for that value.

If you mouse over an identity cell (the diagonal set of cells with values of 1), then the tooltip will indicate the tickers in the table that are most and least correlated with the selected identity ticker along with the associated correlation values.

Correlation


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