# covariance

## Definitions

### Astronomy

• The principle that the laws of the universe are everywhere the same. The idea is implicit in most astronomy, but there are schools of thought which consider, e.g., that gravitation may not operate over large distances according to the same inverse square law seen in action over the scale of the solar system.

### Economics

• A measure of the extent to which two economic or statistical variables move up and down together. For two variables x and y with values xi, yi, i=1,,n, the covariance is cov(x,y) = Si=1n(xi-m(x))(yi-m(y)), where m(·) is the mean of the values in its argument.

### Forex

• Statistics: Measure of correlation between two variables multiplied by its standard deviation.

Finance: Tendency of two variables to move together. A positive covariance indicates that the assets' return move jointly while negative covariance indicates that it moves inversely. This measure is used to determine the degree of diversification of a portfolio.

### Health Economics

• (written as Covariance)

A measure of the extent to which the values taken by two variables are associated. It is measured as the value of the product of the deviations of the variables from their arithmetic mean. The unbiased covariance of a population sample is formally defined as:

where the (xi, yi) are independent, i = 1. .. n, and the bars over the variables x and y denote sample means.

http://www.dictionarycentral.com/definition/covariance.html