In
probability theory and
statistics, covariance is a measure of the joint variability of two
random variables. If the greater values of one variable mainly correspond with the greater values of the other variable, and the same holds for the lesser values (that is, the variables tend to show similar behavior), the covariance is positive. In the opposite case, when the greater values of one variable mainly correspond to the lesser values of the other, (that is, the variables tend to show opposite behavior), the covariance is negative. The sign of the covariance therefore shows the tendency in the
linear relationship between the variables. The magnitude of the covariance is not easy to interpret because it is not normalized and hence depends on the magnitudes of the variables. The
normalized version of the covariance, the
correlation coefficient
A correlation coefficient is a numerical measure of some type of correlation, meaning a statistical relationship between two variables. The variables may be two columns of a given data set of observations, often called a sample, or two components ...
, however, shows by its magnitude the strength of the linear relation.
A distinction must be made between (1) the covariance of two random variables, which is a
population parameter
A parameter (), generally, is any characteristic that can help in defining or classifying a particular system (meaning an event, project, object, situation, etc.). That is, a parameter is an element of a system that is useful, or critical, when ...
that can be seen as a property of the
joint probability distribution, and (2) the
sample covariance, which in addition to serving as a descriptor of the sample, also serves as an
estimated value of the population parameter.
Definition
For two
jointly distributed real
Real may refer to:
Currencies
* Brazilian real (R$)
* Central American Republic real
* Mexican real
* Portuguese real
* Spanish real
* Spanish colonial real
Music Albums
* ''Real'' (L'Arc-en-Ciel album) (2000)
* ''Real'' (Bright album) (2010) ...
-valued
random variables
and
with finite
second moments, the covariance is defined as the
expected value (or mean) of the product of their deviations from their individual expected values:
where