Thursday, June 6, 2013

DJIA 2013 vs 1935

Calculated and charted with Sergey Tarassov's Timing Solution
The correlation coefficient concept from statistics is a measure of how well the predicted values from a forecast model "fit" with the real-life data.

The correlation coefficient 'r' is a number between 0 and 1. If there is no relationship between the predicted values and the actual values the correlation coefficient is 0 or very low (the predicted values are no better than random numbers). As the strength of the relationship between the predicted values and actual values increases so does the correlation coefficient.  A perfect fit gives a coefficient of 1.0. Thus the higher the correlation coefficient the better (HERE). For the last 250 trading days the correlation coefficient r is 0.967 when compared to the DJIA in 1935 (DJIA EOD 1920-2013).