This post is for those fond of repeating the axiom “correlation does not imply causation,” because while correlation may not prove causation, it certainly can imply it. In fact, there are instances where the denial of any linkage between correlation and causation proves only that the deniers have their heads in the sand.
In spite of periods of strong positive correlation, the 10-year U.S. Treasury bond yield and the Nikeei 225 stock index have periods of poor and even negative correlation. One year periods were analyzed.
This is a discussion of some of the basic concepts of correlation. It is written to provide a background reference to articles written and to be written analyzing various economic and financial relationships.