How to Calculate Covariance and Correlation in R Programming

In this article, we will learn about how to calculate two important statistics – covariance and correlation in R programming.

Both covariance and correlation are indicators of relationship between two variables, in terms of how they move with respect tom each other. If they move in the same direction, there is a positive relationship, but if they move in the opposite direction (when one goes up, the other goes down), then there is a negative relationship. Learn more about covariance and correlation and their formulas.

While covariance indicates the direction of relationship between two variables, correlation indicates both the direction and the strength of the relationship. Correlation is actually a translation of covariance into a unit-less standardized measure that we can understand (-1.0 to 1.0).

Let’s take two vectors containing stock prices of two stocks over the past 10 days.

1    AAPL <- c(92.04, 93.59, 94.4,