Financial Toolbox

corr2cov

Convert standard deviation and correlation to covariance

Syntax

• ExpCovariance = corr2cov(ExpSigma, ExpCorrC)
  

Arguments

ExpSigma	Vector of length n with the standard deviations of each process. n is the number of random processes.
ExpCorrC	(Optional) n-by-n correlation coefficient matrix. If ExpCorrC is not specified, the processes are assumed to be uncorrelated, and the identity matrix is used.

Description

corr2cov converts standard deviation and correlation to covariance.

ExpCovariance is an n-by-n covariance matrix, where n is the number of processes.

• ExpCov(i,j) = ExpCorrC(i,j)*(ExpSigma(i)*ExpSigma(j) 
  

Examples

• ExpSigma = [0.5  2.0];
  
  ExpCorrC = [1.0 -0.5
             -0.5  1.0];
  
  ExpCovariance = corr2cov(ExpSigma, ExpCorrC)
  

Expected results:

• ExpCovariance =
  
      0.2500   -0.5000
     -0.5000    4.0000
  

See Also

corrcoef, cov, cov2corr, ewstats, std

cftimes

cov2corr