Rank Correlations: Spearman's and Kendall's Tau (FRM T5-06)
In this video, we will briefly review the Pearson correlation coefficient. Of course, that's the most popular measure of correlation, but mostly just so we have a baseline to compare to the two measures of rank correlations. Specifically, we will look at the Spearman's rank correlation and Kendall's tau rank correlation. These two are measures of ordinal correlation as opposed to a measure of cardinal correlation. In computing Kendall's tau, which has a formula that's easier to remember, we will have to count up the number of concordant versus discordant pairs.
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