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The Corporate Finance Institute ExcelWe get the following result:A few notes about the AVERAGE Function1. The AVERAGE function ignores empty cells.2. If a range or cell reference argument contains text, logical values, or emptycells, those values are ignored. However, cells with the value zero areincluded.3. Arguments that are error values or text that cannot be translated intonumbers cause errors in the function.Click here to download the sample Excel filecorporatefinanceinstitute.com170
The Corporate Finance Institute ExcelCORRELCalculate the correlationcoefficient between two variablesarray1array2What is the CORREL Function?The CORREL function is categorized under Statistical functions. It will calculatethe correlation coefficient between two variables.As a financial analyst, the CORREL function is very useful when we want to findthe correlation between two variables, i.e., the correlation between a particularstock and the market index.Correlation Formula=CORREL(array1, array2)The CORREL function uses the following arguments:1. Array1 (required argument) – It is the set of independent variables. It is acell range of values.2. Array2 (required argument) – It is the set of dependent variables. It is thesecond cell range of values.The equation for the correlation coefficient is:Where:are the sample means AVERAGE(array1) and AVERAGE(array2).So, if the value of r is close to +1, it indicates a strong positive correlation, and ifr is close to -1, it shows a strong negative correlation.How to use CORREL Function in Excel?The CORREL function was introduced in Excel 2007 and is available in allsubsequent Excel versions. To understand the uses of the function, let usconsider an example:corporatefinanceinstitute.com171
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