corrcoef

Correlation coefficients for financial time series object

corrcoef is not recommended. Use timetable instead. For more information, see Convert Financial Time Series Objects fints to Timetables.

Syntax

r = corrcoef(X)
r = corrcoef(X,Y)

Arguments

X	Financial time series object, where each row is an observation and each column is a variable.
Y	Financial time series object, where each row is an observation and each column is a variable.

Description

corrcoef is based on the MATLAB^® corrcoef function. See corrcoef.

r=corrcoef(X) calculates a matrix r of correlation coefficients for a financial times series object (fints) X, in which each row is an observation, and each column is a variable.

r=corrcoef(X,Y), where X and Y are financial time series objects as column vectors, is the same as r=corrcoef([X Y]). corrcoef converts X and Y to column vectors if they are not; that is, r = corrcoef(X,Y) is equivalent to r=corrcoef([X(:) Y(:)]) in that case.

If c is the covariance matrix, c= cov(X), then corrcoef(X) is the matrix whose (i,j) 'th element is ci,j/sqrt(ci,i*c(j,j)).

[r,p]=corrcoef(...) also returns p, a matrix of p-values for testing the hypothesis of no correlation. Each p-value is the probability of getting a correlation as large as the observed value by random chance, when the true correlation is zero. If p(i,j) is less than 0.05, then the correlation r(i,j) is significant.

[r,p,rlo,rup]=corrcoef(...) also returns matrices rlo and rup, of the same size as r, containing lower and upper bounds for a 95% confidence interval for each coefficient.

[...]=corrcoef(...,'PARAM1',VAL1,'PARAM2',VAL2,...) specifies additional parameters and their values. Valid parameters are:

• 'alpha' — A number from 0 through 1 to specify a confidence level of 100*(1-ALPHA)%. Default is 0.05 for 95% confidence intervals.

• 'rows' — Either 'all' (default) to use all rows, 'complete' to use rows with no NaN values, or 'pairwise' to compute r(i,j) using rows with no NaN values in column i or j.

The p-value is computed by transforming the correlation to create a t-statistic having N – 2 degrees of freedom, where N is the number of rows of X. The confidence bounds are based on an asymptotic normal distribution of 0.5*log((1 + r)/(1 – r)), with an approximate variance equal to 1/(N – 3). These bounds are accurate for large samples when X has a multivariate normal distribution. The 'pairwise' option can produce an r matrix that is not positive definite.

Examples

Compute Correlation Coefficients

This example shows how to generate random data having correlation between column 4 and the other columns.

x = randn(30,4);       % uncorrelated data
x(:,4) = sum(x,2);     % introduce correlation
f = fints((today:today+29)', x);  % create a fints object using x

Warning: FINTS is not recommended. Use TIMETABLE instead. For more information, see <a href="matlab:web(fullfile(docroot, 'finance/convert-from-fints-to-timetables.html'))">Convert Financial Time Series Objects (fints) to Timetables</a>.

[r,p] = corrcoef(x);    % compute sample correlation and p-values
[i,j] = find(p<0.05);  % find significant correlations
[i,j]                  % display their (row,col) indices

ans = 4×2

     4     1
     3     2
     2     3
     1     4

Class support for inputs X,Y: float: double and single.