Covariance and correlation
Okay kiddo, imagine you have a basket with some apples and oranges. Let's say you have 5 apples and 5 oranges. Now, let's say you have another basket with only 3 apples and 7 oranges.
The number of apples and oranges in each basket is not the same, right?
Covariance is kind of like that. It tells us how much two things, like the number of apples and oranges in each basket, are related. If the number of apples in each basket goes up and down together, the covariance is positive. But if the number of apples goes up when the number of oranges goes down, the covariance is negative. And if the two things have nothing to do with each other, the covariance is zero.
Correlation is like covariance's best friend. It tells us how strong the relationship between the two things is. If they are very related, the correlation is close to 1. If they are not related, the correlation is close to 0. And if they are opposite, the correlation is close to -1.
So, if you have a lot of apples in one basket and a lot of oranges in another, the covariance is positive and the correlation is strong. But if one basket has a lot of apples and the other has a lot of oranges, the covariance is negative and the correlation is weak.
The number of apples and oranges in each basket is not the same, right?
Covariance is kind of like that. It tells us how much two things, like the number of apples and oranges in each basket, are related. If the number of apples in each basket goes up and down together, the covariance is positive. But if the number of apples goes up when the number of oranges goes down, the covariance is negative. And if the two things have nothing to do with each other, the covariance is zero.
Correlation is like covariance's best friend. It tells us how strong the relationship between the two things is. If they are very related, the correlation is close to 1. If they are not related, the correlation is close to 0. And if they are opposite, the correlation is close to -1.
So, if you have a lot of apples in one basket and a lot of oranges in another, the covariance is positive and the correlation is strong. But if one basket has a lot of apples and the other has a lot of oranges, the covariance is negative and the correlation is weak.