University Maths Notes: Probability and Statistics – Covariance and Correlation of Linear Combinations of the Standard Normal Distribution
The standard normal distribution,
has
mean 0 and variance = standard deviation = 1. If we have two
distributions
and
then
the covariance between them is
If
and
are
independent then
so
If
however
and
are
linear combinations of independently distributed standard normal
distributions
say
and
then
and
are
not independent, even though
and
are.
We can find the
and
the correlation between
and![]()
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and
similarly![]()
Since
are
are
independent,![]()
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The formula for the correlation between
and
is![]()
![]()
![]()
Then the correlation between
and
is![]()
We can follow the same procedure for any linear combination of standard normal distributions.
If
and
then
![]()
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