Getting variance from known correlation

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    Correlation Variance
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Discussion Overview

The discussion revolves around finding the variance of the sum of two random variables, X and Y, given their correlation and the fact that they share the same distribution. Participants explore the relationship between correlation, covariance, and variance in this context.

Discussion Character

  • Mathematical reasoning
  • Exploratory
  • Technical explanation

Main Points Raised

  • One participant notes that knowing the correlation and the same distribution for X and Y leads to the equations for covariance and variance, suggesting a missing link in the reasoning.
  • Another participant points out that since X and Y have the same distribution, the variances and standard deviations are equal, proposing to substitute these into the existing equations.
  • A participant expresses uncertainty about needing additional information, such as the specific value of covariance, to solve for the variance of the sum.
  • One participant derives a relationship between variance and covariance, leading to a conclusion about the variance of the sum being equal to the variance of each variable.
  • Another participant confirms the derived relationship and contrasts it with the case of uncorrelated variables, noting the effect of negative correlation on the variance calculation.

Areas of Agreement / Disagreement

Participants generally agree on the mathematical relationships involved but express uncertainty regarding the need for additional constants or information to finalize the solution. The discussion remains somewhat unresolved regarding the necessity of specific values for covariance or variance.

Contextual Notes

The discussion highlights the dependence on the definitions of variance and covariance, as well as the implications of correlation on these calculations. There is an acknowledgment of the need for specific values to reach a definitive conclusion.

das1
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Suppose X and Y have the same distribution, and Corr(X,Y) = -0.5. Find V[X+Y].

I know that Corr(X,Y)*SD[X]SD[Y] = Cov(X,Y)

and also V[X+Y] = V[X] + V[Y] + 2Cov(X,Y)

So there must be a missing link, maybe an identity, that I'm not realizing. I think the fact that the 2 variables have the same distribution is probably important, I'm just not sure how.

Thanks!
 
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das said:
Suppose X and Y have the same distribution, and Corr(X,Y) = -0.5. Find V[X+Y].

I know that Corr(X,Y)*SD[X]SD[Y] = Cov(X,Y)

and also V[X+Y] = V[X] + V[Y] + 2Cov(X,Y)

So there must be a missing link, maybe an identity, that I'm not realizing. I think the fact that the 2 variables have the same distribution is probably important, I'm just not sure how.

Thanks!

Hey das! (Smile)

Since X and Y have the same distribution, we have that V[Y]=V[X] and SD[Y]=SD[X].
What if you substitute that and combine the equations you already have?
 
Hi thank you!

So substituting that we have something like $$-0.5 = \frac{Cov(X,Y)}{SD[X]^2}$$ and $$V[X+Y] = 2V[X] + 2Cov[X+Y]$$ Wouldn't we still need to know more info, like what Cov(X,Y) is, before solving? And we can't get those without knowing what SD[X] or V[X] are (or SD[Y] or V[Y]). Don't we need one more constant here?
 
Last edited:
OK, did it all out and got
$$\frac{-var(X)}{2} = cov(X,Y)$$
then $$-var(X) = 2cov(X,Y)$$
then $$V[X+Y] = V[X] = V[Y]$$
I was thinking I needed a constant but not sure if that's possible here...is there a way I can actually make this a constant or is this as simple as it can get?
 
Yep. That's it and it is as simple as it can get. (Nod)

Note that if X and Y were uncorrelated, we would have $V[X+Y] = 2V[X]^2$.
Now that X and Y are negative correlated by a factor of $-\frac 1 2$ that factor of $2$ effectively disappears.
 

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