Research method · beginner guide
Pearson correlation between strategy returns
Pearson’s correlation coefficient describes the direction and strength of a linear relationship between two aligned return series. It ranges from −1 to +1: positive values move together in the sample, negative values tend to move in opposite directions, and values near zero indicate little measured linear relation.
Why dates must align
A fair comparison uses returns from the same dates and the same evaluation window. SYNBAI Nexus compares daily out-of-sample returns and requires at least 30 shared observations. If one strategy has no return for a date, the tool does not invent one.
What the coefficient cannot tell you
Correlation does not measure profitability, drawdown or causality. A low historical correlation may change in a crisis or a different market regime. Strategy sizing and overlapping positions also affect combined portfolio risk.
Use correlation as a descriptive check, not as a standalone portfolio decision.