Statistics

Covariance

Covariance measures the extent to which two variables, say x and y, move together. A positive covariance means that the variables move in tandem and a negative value indicates that the variables have an inverse relationship. While covariance can indicate the direction of relation, the correlation coefficient is a better measure of the strength of relationship.

Correlation Coefficient

Correlation coefficient measures the degree to which two variables move together. Its value ranges between -1 and 1. -1 indicates perfectly negative relationship, 1 shows a perfectly positive relationship and zero means there is no linear relationship between the variables. Correlation doesn’t necessarily mean causation.