Syntax
COVAR(array1, array2)
| Parameter | Description |
|---|---|
| array1 | Parameter of the COVAR function. |
| array2 | Parameter of the COVAR function. |
Examples
Stock covariance
Formula
=COVAR(B2:B253, C2:C253)
Returns the population covariance of daily returns for two stocks over one trading year. Used in portfolio variance calculations.
Height vs. weight
Formula
=COVAR(D2:D100, E2:E100)
Returns a positive covariance, indicating that taller people in the sample tend to weigh more.
Covariance matrix entry
Formula
=COVAR(A2:A50, B2:B50)
Returns one cell of a covariance matrix used in multivariate statistics.
Common Errors
#N/A
The arrays have different lengths. Both must contain the same number of data points.
#DIV/0!
One or both arrays are empty.
Tips
Use COVARIANCE.S for samples
COVAR calculates population covariance (divides by n). If your data is a sample, use COVARIANCE.S (divides by n-1).
Scale-dependent
Unlike CORREL, covariance depends on the scale of your data. Doubling all values in one array doubles the covariance. Use CORREL for a standardized measure.
Portfolio variance formula
Portfolio variance = w1^2*VAR(A) + w2^2*VAR(B) + 2*w1*w2*COVAR(A,B). Covariance is essential for diversification calculations.
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