What does a negative covariance mean?

1 Answer
Nov 5, 2015


Negative covariance is an indication that the movement in one variable is opposite to the movement of the other variable.


If X is moving upwards, Y is moving downwards
if X is moving downwards, Y is moving upwards.
. For example, when price is high, demand is less and when price is less, demand is more.
Here, the movement in the two variables are of opposite direction.
On the other hand, the more you prepare, the better your grade in the exam. Here both the variables move in the same direction.