Calculate covariance given a joint probability function:

We can calculate covariance using the joint probability function of the random variables if that can be estimated. The joint probability function of two random variables, X and Y, denoted P(X, Y), gives the probability of joint occurrences of values X and Y. For example, P(3, 2) is the probability that X equals 3 and Y equals 2.

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Subject 7. Covariance and Correlation
= 0.010368. So, correlation = ρ(R f , R g )= cov(R f , R g ) / σ(R f ) x σ(R g ) = 0.010368 / (0.117576 x 0.088182) = 0.99999. This indicates an almost perfect positive linear relationship between R f and R g . <span>Calculate covariance given a joint probability function: We can calculate covariance using the joint probability function of the random variables if that can be estimated. The joint probability function of two random variables, X and Y, denoted P(X, Y), gives the probability of joint occurrences of values X and Y. For example, P(3, 2) is the probability that X equals 3 and Y equals 2. <span><body><html>