Covariance Calculator

What is the Covariance ?

Covariance measures the directional relationship between the returns on two assets. A positive covariance means asset returns move together, while a negative covariance means they move inversely

Covariance is calculated by analyzing at-return surprises (standard deviations from the expected return) or multiplying the correlation between the two random variables by the standard deviation of each variable

Covariance Formula

Sample Covariance formula

• Cov_(xy) denotes to sample covariance
• X_i is the observed values X dataset
• Y_j is the observed values Y dataset
• N is the number of observations

Population Covariance formula

• Cov_(xy) denotes to population covariance
• X_i is the observed values X dataset
• Y_j is the observed values Y dataset
• N is the number of observations