Correlation coefficient

The correlation coefficient, sometimes referred to simply as “correlation,” refers to the degree of similarity between two variables. In the markets, correlation is typically used to measure how close the relationship is between two price series (e.g., two distinct stocks or markets), between an individual stock (or trading fund) and an index, and so on.

Correlation coefficients range between -1.00 and +1.00, with +1.00 representing perfect positive correlation — i.e., two variables moving precisely in tandem; -1.00 represents perfect negative correlation — i.e., two variables moving exactly opposite to one another. A correlation coefficient of zero means the two variables have no discernible relation.
The Web site http://davidmlane.com/hyperstat/index.html offers relatively easy-to-digest definitions of this and other statistical terms.