Correlation of two sums sharing a common term
Question
Let , , be pairwise uncorrelated with variances , and respectively. Put and . What is the correlation between and ?
Short answer
. Only the shared term contributes covariance: . The variances are and , so .
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Open the worked solutionLessons behind this question
- Covariance and Correlation
- Sample Spaces, Events, and the Probability Axioms
- Conditional Probability, Total Probability, and Bayes' Rule
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