Spearman’s Rank

What is Spearman’s Rank?

Spearman’s Rank Correlation Coefficient is used to discover the strength of a link between two sets of data. It is denoted by “ρ”.

A non-parametric measure of rank correlation is the coefficient of correlation (statistical dependence of ranking between two variables). It is a statistical measure of the strength of a monotonic relationship between paired data.
Example of Spearman’s Rank:

$ \rho = 1- \frac{6\sum di^{2}}{n(n^{2}-1)} $

ρ= Spearman correlation coefficient
di²= difference between the two ranks of observation
n= number of observations

Why is Spearman Correlation Coefficient important?

It aids in determining the strength of a trend or the occurrence of turning moments. This indicator can determine the relationship between a strong trend and price fluctuations in the stock market.