Code of practice and Correlation coefficient: Difference between pages

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1.
The correlation coefficient is a relative measure of the correlation between two variables. It measures the degree to which their values are interdependent. In other words, the extent to which changes in the value of one of the variables are associated with changes in the value of the other variable.  


Relevant published and authoritative guidance not having direct legal effect.
Correlation coefficients are widely used in portfolio diversification and hedging calculations.


Codes of practice are not statements of law and there is no direct penalty for failing to comply with them, but courts and tribunals will take any relevant codes of practice into account when making legal decisions.
Mathematically, correlation coefficient is the covariance divided by the product of the standard deviations.


Sometimes known as codes of conduct.
A correlation coefficient of -1 means perfect negative correlation. The two variables always move in opposite directions by a perfectly predictable proportionate amount.


A correlation coefficient of 0 means that there is no correlation between the values of the two variables. The variables are statistically independent.


2. ''Pensions''.
A correlation coefficient of +1 means perfect positive correlation. The two variables always move in the same direction by a perfectly predictable proportionate amount.


In the UK pensions context a Code of Practice is a document issued by the UK Pensions Regulator providing practical guidelines on the requirements of pensions legislation and setting out standards of conduct and practice expected of those who must meet these requirements.
Also known as the Coefficient of correlation.


== See also ==
* [[Co-efficient]]
* [[Correlation]]
* [[Covariance]]
* [[Delta-normal method]]
* [[Mean reversion]]
* [[Random walk]]
* [[Rho]]
* [[Standard deviation]]


==See also==
* [[ACT Ethical Code]]
* [[Code]]
* [[Code of conduct]]
* [[Ethics]]
* [[Good practice]]
* [[Guidance]]
* [[Technical provisions]]
* [[Pensions Regulator]]
* [[UK Corporate Governance Code]]
[[Category:Ethics_and_corporate_governance]]

Revision as of 14:19, 23 October 2012

The correlation coefficient is a relative measure of the correlation between two variables. It measures the degree to which their values are interdependent. In other words, the extent to which changes in the value of one of the variables are associated with changes in the value of the other variable.

Correlation coefficients are widely used in portfolio diversification and hedging calculations.

Mathematically, correlation coefficient is the covariance divided by the product of the standard deviations.

A correlation coefficient of -1 means perfect negative correlation. The two variables always move in opposite directions by a perfectly predictable proportionate amount.

A correlation coefficient of 0 means that there is no correlation between the values of the two variables. The variables are statistically independent.

A correlation coefficient of +1 means perfect positive correlation. The two variables always move in the same direction by a perfectly predictable proportionate amount.

Also known as the Coefficient of correlation.

See also


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