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The Corporate Finance Institute Excel
CORREL
Calculate the correlation
coefficient between two variables
array1
array2
What is the CORREL Function?
The CORREL function is categorized under Statistical functions. It will calculate
the correlation coefficient between two variables.
As a financial analyst, the CORREL function is very useful when we want to find
the correlation between two variables, i.e., the correlation between a particular
stock 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 a
cell range of values.
2. Array2 (required argument) – It is the set of dependent variables. It is the
second 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 if
r 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 all
subsequent Excel versions. To understand the uses of the function, let us
consider an example:
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