Correlation is a statistical measure that expresses the extent to which two variables change together at a constant rate.

Correlation tells us if the two variables have a linear relationship, and the strength of that relationship.

**Formula to calculate correlation.**

σx is the standard deviation of variable x.

σy is the standard deviation for variable y.

**Example:**

Suppose the covariance of two stocks x and y is 90, calculate their correlation if their standard deviation is 5 and 3 respectively.

Therefore, their correlation is 6.