Exercise

The correlation matrix

The correlation matrix can be used to estimate the linear historical relationship between the returns of multiple assets. You can use the built-in .corr() method on a pandas DataFrame to easily calculate the correlation matrix.

Correlation ranges from -1 to 1. The diagonal of the correlation matrix is always 1, because a stock always has a perfect correlation with itself. The matrix is symmetric, which means that the lower triangle and upper triangle of the matrix are simply reflections of each other since correlation is a bi-directional measurement.

In this exercise, you will use the seaborn library to generate a heatmap.

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Calculate the correlation_matrix of the StockReturns DataFrame.