The Law Dictionary

Your Free Online Legal Dictionary • Featuring Black’s Law Dictionary, 2nd Ed.

COVARIANCE Definition & Legal Meaning

Definition & Citations:

A statistical measure of the relationship between two variables (e.g., financial ASSET prices), often used to determine the magnitude of CORRELATION. The covariance between two assets can be computed via: where xAj is an observation of asset A, xA is the MEAN of asset A, x Bj is an observation of asset B, xB is the mean of asset B, and n is the number of observations. See also CORRELATION COEFFICIENT.


This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.