Everyone is trying to figure out the roots of the current financial crisis. You can trace it back to one man, Mr. Li, and a formula that was very misused by Wall Street. Let me start by telling you a story that took place some 30 years ago. I was sitting in my statistics class and the professor walked in and said, "Today we are going to learn about correlations." He explained that correlation is very simple. It is a single number that describes the degree of relationship between two variables, and that there was a formula in our book we could use. "But right now," he said " it's more important that you learn the concept that a correlation is a single number that describes the degree of relationship between two variables," he repeated, as professors often do. "Your answer will therefore always range between -1 and +1."
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