Covariance
Covariance is a measure of how two random variables move together; it indicates the direction of their joint variation, with positive covariance meaning they tend to move in the same direction and negative covariance meaning they tend to move in opposite directions.
Example: If Stock X and Stock Y tend to rise together in market rallies, their covariance is positive; if Stock X tends to rise while Stock Y tends to fall, their covariance is negative.
💬 Comments