To find the coefficient, John gathers the following prices for the last five years ( Step 1): Before adding Apple to his portfolio, he wants to assess the correlation between the stock and the S&P 500 to ensure that adding the stock won’t increase the systematic risk of his portfolio. His portfolio primarily tracks the performance of the S&P 500 and John wants to add the stock of Apple Inc. The CORREL function in Excel is one of the easiest ways to quickly calculate the correlation between two variables for a large data set. However, there are many software tools that can help you save time when calculating the coefficient. You can see that the manual calculation of the correlation coefficient is an extremely tedious process, especially if the data sample is large.
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