Part 2. MM4XL Tools > 1. Strategic Tools > Risk Analyst > 4. Functions > 2. Utility Functions > Function mmCORREL(CorrMtx)

Risk Analyst

Function mmCORREL(CorrMtx)

This array function applies the Scheuer-Stoller method, and it returns values useful to create correlated random variables according to a specified correlation matrix. It is mainly used jointly with the distribution functions available in Risk Analyst.

An array formula is entered with Ctrl+Shift+Enter, and in this case it requires you to select as many cells as columns in the input range. The function takes one argument.

CorrMtx is the matrix of correlation coefficients. It must be a square table (the same number of rows and columns), at least 2x2, with the values on the diagonal being all ones and the values in the lower half being equal to the values in the upper half of the matrix (symmetric matrix). Correlation coefficients can vary between -1 and 1.

Example

The following formula creates a Normal variable correlated according to the coefficients in the second column of the input matrix in the range C10:E12 of the file mmCORREL.xls. Range C16:E16 hosts the values returned by the mmCORREL function:

mmNORMAL(10, 1, D16)

More information concerning the application of the mmCORREL function can be found in the section Example 3: Correlated-Shares of this help chapter. Read also the section Why correlated variables? in this help chapter and study the example file mmCORREL.xls.
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