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Correlation Of Two Assets Calculator

Work out correlation of two assets instantly with clear inputs, formula shown and shareable results.

About Correlation Of Two Assets Calculator

Correlation is covariance normalised by the two volatilities, so it always lies between −1 and +1 and is comparable across asset pairs. Its square gives the share of variation the two assets have in common.

Formula

Correlation

ρ = Cov(A,B) / (σ_A σ_B); R² = ρ²

Worked example

With the default values below, Correlation Of Two Assets Calculator returns Correlation Coefficient of 0.3333. Change any input above and every figure here is recalculated in your browser.

Inputs used

Covariance Between Returnsaccepts -1–1
0.0072
Volatility Of Asset Aaccepts 0.1–100 %
18 %
Volatility Of Asset Baccepts 0.1–100 %
12 %

Results

Correlation Coefficient
0.3333
Shared Variation (R²)
11.11%
Covariance Used
0.007200
Diversification Potential Score
33.33

Step by step

  1. 1Values used
  2. 2Correlation
  3. 3Correlation Coefficient= 0.3333
  4. 4Shared Variation (R²)= 11.11
  5. 5Covariance Used= 0.007200
  6. 6Diversification Potential Score= 33.33

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 6 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

Why normalise covariance?

Raw covariance depends on the units and scale of returns, so it cannot be compared across pairs. Correlation can.

Is a low correlation enough?

It helps, but check whether it holds in stressed markets — that is when the diversification is actually needed.

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