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READING 29: CORRELATIONS AND COPULAS #32

Open Grefer opened 4 years ago

Grefer commented 4 years ago

https://www.melonsblog.cn/2019/10/reading-29-correlations-and-copulas.html#more

Grefer commented 4 years ago

When small changes are made to a small positive-semidefinite matrix such as a 3 × 3 matrix, the matrix will most likely remain positive-semidefinite. However, small changes to a large positive-semidefinite matrix such as 1,000 × 1,000 will most likely cause the matrix to no longer be positive-semidefinite. Variance and covariance rates are calculated using the same EWMA or GARCH model parameters to ensure that a positive-semidefinite model is constructed.

Grefer commented 4 years ago

Pearson correlation, correlation matrix and covariance are used to measure the degree of the relationship between linearly related variables. Spearman correlation is a better measure to indicate if one variable is monotonically related to the other variable.