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Correlation

Correlation is used in order to measure the strength of a relationship between two sets of data. Specifically, in investment management, it is used to measure how strong the relationship of a portfolio’s performance is to its benchmark. Values or coefficients for correlation range from 1 to -1, where 1 indicates perfect correlation and -1 indicates perfect negative correlation. If the coefficient or value were 0 there would be no relationship between the two sets of data at all.

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