Correlation Calculator
Diversification only helps when holdings don't move in lockstep. Correlation puts a number on it: +1 means two assets move perfectly together, −1 perfectly opposite, and 0 no linear relationship. Paste two return series and this computes their Pearson correlation.
- • Pearson r = covariance(A, B) ÷ (std dev A × std dev B), over the matched pairs.
- • Rough read: above +0.7 strong positive · around 0 unrelated · below −0.7 strong negative.
Worked example: returns that rise and fall together score near +1; two unrelated series land near 0. Use each period's return, not the raw price.
Correlation is linear-only and backward-looking, and it's unstable — assets that look uncorrelated in calm markets often converge toward +1 in a crash, exactly when diversification is supposed to help. It is not causation. Educational tool, not advice.
A calculator shows what a rule should do on paper. Whether a strategy actually beats simply buying and holding — costs on, losses shown, no hindsight — is a different question, and the only one that pays. Most rules don't beat holding; the backtest is how you find the rare few that do — so when you build one that survives, you'll know it isn't a fake edge, then prove it forward before you risk real money. It won't tell you you'll win — nothing honest can.