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In the domain of finance, an R-Squared value above 0.7 is typically seen as indicating a high level of correlation, whereas one below 0.4 indicates a low level of correlation.
What is correlation?
A statistical measure known as correlation expresses how closely two variables are related linearly (meaning they change together at a constant rate). It's a typical technique for describing straightforward connections without explicitly stating cause and consequence.
The strength of the association is measured by the sample correlation coefficient, or r. The statistical significance of correlations is also examined.
For describing straightforward links between data, correlations are helpful. Consider a dataset of campgrounds in a park in the mountains as an illustration. You're interested in finding out if the height of the campsite—how high up the mountain it is—and the summer's typical high temperature are related.
Hence, In the domain of finance, an R-Squared value above 0.7 is typically seen as indicating a high level of correlation, whereas one below 0.4 indicates a low level of correlation.
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