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Practical Application of Correlation Matrix Home Work Answers -To Understand the Future Scenario

by May 24, 2017Homework Help

Before understanding the practical application of correlation matrix home work answers. It is very important to know that what is it really mean and how can i use it for my benefit to gain more. So let me first define that what this matrix really mean is.

It is a table which shows correlation coefficients between different sets of variables. Each and Every random variables of (Xi) are correlated with each other values of the table (Xj). This will give you the clear picture that which pairs have highest degree of co-relation.

correlation matrix home work answers

This table shows the coefficient correlation matrix between B1 to B5

The thing which is shown in the above table is just a theoretical concept to clear your conception about Correlation matrix. Now let’s imagine that there are thousands of options out of which you just need to choose any top three or five out of them based on certain eligibility or criteria. With correlation matrix home work answers you can get a detailed idea of this process!

Now the question arises that how you can do that? The answer is that in most of the cases this Matrix is used in addressing the stock market analysis. So now you need to think from the point of view of a stock market analyst that how you can choose the most appropriate stock from a certain group of industries.

Correlation Coefficient matrix is quite an efficient tool in the hands of stock market traders to determine that. It will help you to analyze the market trends and can make predictions for the future very easy and ensures clarity in decision making. The Coefficient Matrix or coefficient correlation matrix home work answers are related to Co variance matrix to solve your investment decision-making problem in stock market properly.

Before Learning the tricks to learn the Process of Correlation matrix and its home work answers lets first know the tactics how to read a correlation matrix.


In this Matrix, there are three rows and three columns with having nine elements with a square matrix. Basics of correlation coefficient matrix can be explained using this but in reality, if the data are collected from real source they are very huge in number, and the calculation will also become very much complex.

Let’s Understand SAMPLE VARIANCE :-

Now let us take an example that we have calculated the sample variance of three distinct variables suppose of variable X,Y, Z. What is the actual Sample variance? The Sample variance is very simple it is just the sum of squares which is calculated using sample Central movement, sample size, and sample mean. It shows the variance, statistical concept between two or more variables.

A variance or Co variance matrix is denoted by Σ. If the sample variance of three elements is calculated X,Y,Z then it would be denoted by notations and.The formula  for calculating the sample variance of variable  as follows =Σ.(n+1)

If we notice carefully, then the first element represent the sample variance of X with itself and the second element represents the sample variance of X with Y and so on. If any one notices three elements of a matrix – and – are repeated twice in the matrix the upper and the lower half of the matrix is the symmetry to one another.

In practicality, one needs to keep in mind that variance and Co variance look like this Σ=, But mathematically it is in accurate as in the real world it is a very tough job to maintain this that’ s why companies hire actuaries and data analyst to perform this task. This scenario happens because if the variance between the variables is positive, then it means that if the value of one variable is high then the other variable will also be high.

If the variance is negative, then it means that if the value of one variable goes down, then the value of other variable will surely go up.

Relation between Correlation matrix and home work answers 

The relation between correlation coefficient is between plus 1 and minus 1.Practically it is impossible to havea value exactly +1 or exactly-1. It can be closer to +1 or -1. This clearly indicates that in real world no relationship is stable. The closer the value of the variables to the +1 or -1 it will indicate that the variables have close relationship if no then they don’t have any relationship at all between them.

Correlation Matrix Home work answers as they are used in the real world

This matrix is practically used to understand the behavior of stock market on the basis of short term, medium term, and long term basis. As if we take the prices of Gold and Silver then if the price of gold increases then the price of silver also increases in the long term.Thus it reflects a very positive relationship between the two variable on the long-term basis, on the other hand, it may not be the same in case of short term basis say for 1 month or 3 to 5 month in case of medium-term basis. Thus a total data set of 5 years is taken into consideration to understand the market trend and project the future behavior of the stock market.

Are the details now clear? You can opt for Correlation Matrix homework answers from reputed online websites!