"Auto" means "self." And "correlation" is when something is related to or similar to something. So autocorrelation means you're similar to yourself...wait...what?
Let's try it another way. Autocorrelation is basically the mathematical expression of "those who do not understand the past are doomed to repeat it." But in a good way.
You're going to compare the behavior of the current returns of an investment to the returns of the investment over a previous (but similar) time period. If the current returns are positively autocorrelated to the past returns over those same time periods, your investment's behavior moving forward will probably be similar to what happened to the investment in the previous returns' time periods.
In short, if you find a stock to be highly positively-autocorrelated, and your stock showed gains in the recent past, you can probably expect the stock to show gains going forward. Probably…that's an important qualifier. Autocorrelation isn’t a guarantee. And it's also not about how much like Ford, GM is...
Related or Semi-related Video
Finance: Why Do Taxes Exist?137 Views
Why do taxes exist and notice we're saying that with a kind of a whiny tone
alright well someone has to pay for this and this and this and this yep there are [Hand pointing to a road, a school, a plane and a park]
a bunch of different types of taxes in each of them carries a different purpose
yeah Road taxes get paid in large part out of
the gasoline you buy you got to pay for the building and maintaining of potholes [Car drives into a pothole]
right and that makes sense if you drive a car you use the roads more so you
should pay more for its use that's like a use tax get it cleverly named if for [Price for federal tax per gallon and state tax per gallon]
when you own a home you'll pay real estate tax and for the most part that
tax is designated to pay schools all right well but like everything [Hand holding money from real estate tax to pay for schools]
government related nothing is simple in America the federal government has kind
of a matching program for schools where they pay for a portion of the education
cost based on various factors and you don't want us to get into that in the [complicated equation on chalkboard]
video all right well the largest taxes most people pay are income taxes and
those generally pay for the government to you know govern us if a couple made a
hundred grand jointly in California last year they'd pay around thirty [A couple stood together in their home]
thirty-five grand in taxes that money covers things like shiny new airplanes
to force the mean countries to play nice in the schoolyard it covers repairs to
crumbling bridges and tunnels across the country it covers public protective [Bridges crumbling]
services like police and fire department people
it covers libraries and public parks, well don't feel like you're getting your
money's worth these days if you're ever not feeling that you can always move to [Woman chased from a park by a tiger]
the Ukraine discounts on citizenship they're everywhere
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