Pearson vs. Spearman: negative and positive values

MiUSA

New Member
Hey everyone, thanks for having and helping me .

I calculated both Pearson and Spearman correlation coefficients on time series data of weekly returns of two assets (around 470 observations each). I got 0.017 for the Pearson correlation and -0.13977 for the Spearman. Is that realistic? In other words, is it possible to get such different values and even one being negative while the other is positive? Or did I miscalculate along the way?

Best regards,

Mike

Karabiner

TS Contributor
Is that realistic?
Yes.
In other words, is it possible to get such different values
Yes.
and even one being negative while the other is positive?
Yes. Change of sign is nothing sensational. One coefficient is just 0.15 lower than the other.

Or did I miscalculate along the way?
This possibility, of course, cannot be excluded.

You already know the difference between Spearman rank coreelation and Pearson, I suppose.

With Kind regards

Karabiner

MiUSA

New Member
Thanks for your help, Karabiner. Yes, i plotted the returns of one assets against the other's. Plot is unspectacular an shows (as expected) no meaningful correlation (see plot). I know the difference, yes. for Pearson I simply calculated CORREL() in Excel, for Spearman, I ranked all values (with RANK.AVG) and then used CORREL() on these ranks. Many thanks!

maartenbuis

TS Contributor
You have a number of outliers, and Spearman correlation is less sensitive to that. You can see what is happening by comparing the scatter plot you showed us with a similar scatter plot plotting the ranks agains one another.

MiUSA

New Member
Thanks, maartenbuis. Indeed, the rank scatter plot looks like this and we might see a slight negative correlation, don't we?