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If you observe that the stock is moving up for the past few days, you can expect the stock movement to match the lagging time series.Ĭalculation of autocorrelation is similar to calculation of correlation between two time series. For example, let’s say you identify a stock that has exhibited high autocorrelation historically. We can calculate autocorrelation in stock returns which can be helpful in equity analysis. Autocorrelation is calculated as a function of mean and variance.Īutocorrelation has application in stock returns. The observations are said to be independent if autocorrelation is zero. Autocorrelation, also known as serial correlation or lagged correlation, explains the relationship between observations between the same variable over different periods of time.
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