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#reading-9-probability-concepts
Variance and standard deviation measure the dispersion of a single random variable. Often times, we want to know the relationship between two variables. For example, what is the relationship between the performance of the S&P 500 and that of U.S. long-term corporate bonds? We can use covariance and correlation to measure the degree to which two random variables are related to each other.

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Subject 7. Covariance and Correlation
Variance and standard deviation measure the dispersion of a single random variable. Often times, we want to know the relationship between two variables. For example, what is the relationship between the performance of the S&P 500 and that of U.S. long-term corporate bonds? We can use covariance and correlation to measure the degree to which two random variables are related to each other. Given two random variables, R i and R j , the covariance between the two variables is: Facts about covariance: Covarian


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