What Are the Characteristics of a Good Measure

question 17

Essay

What are the characteristics of a good measure?

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Definitions:

Covariance

A measure indicating the extent to which two variables change in tandem, helping to assess the degree to which they move in relation to each other.

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two variables on a numerical scale from -1 to 1.

Standard Deviations

A measure of the dispersion of a set of data from its mean, often used in finance to quantify the volatility of returns.

Perfectly Negatively Correlated

A relationship between two variables where one variable increases as the other decreases with a correlation coefficient of -1.