Correlation Mental Math Interview Guide
Correlation mental math interview guide for covariance scale, correlation bounds, signs, rough examples, and related-market intuition.
Candidates seeing covariance, correlation, and related-market prompts.
Correlation is bounded
Correlation is always between -1 and 1. That bound is a useful sanity check when rough covariance and volatility arithmetic gets messy.
Sign matters first
Before estimating magnitude, decide whether the relationship is positive, negative, or close to zero. The sign drives much of the interpretation.
Concrete example
If two variables usually move together, correlation should be positive. If one tends to rise when the other falls, correlation should be negative.
Scale covariance
Correlation is covariance divided by the product of standard deviations. This scaling is why covariance units disappear in correlation.
Common mistakes
Candidates often say correlated as if it means identical. Correlation describes relationship strength, not equality or causation.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.