covariance

covariance definition - business

covariance

A statistical measure of the extent to which two variables move together. Covariance is used by financial analysts to determine the degree to which returns on two securities are related. In general, a high covariance indicates similar movements and lack of diversification. Compare variance 1. See also risk.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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