3.
Autocorrelation, also known as serial
correlation or lagged correlation, explains
the relationship between observations
between the same variable over different
periods of time.
Autocorrelation is calculated as a function
of mean and variance.
4.
The observations are said to be
independent if autocorrelation is zero.
The value of autocorrelation can lie between
+1 and -1.
An autocorrelation of +1 represents perfect
positive correlation
A value of -1 represents perfect negative
correlation
5.
We can calculate autocorrelation in stock
returns which can be helpful in equity
analysis.
For example, let’s say you identify a stock that has
exhibited high autocorrelation historically. If you
observe that the stock is moving up for the past
few days, you can expect the stock movement to
match the lagging time series.
