Normal distribution is a term commonly used in the field of social sciences. Another name for it is the Gaussian or Gauss distribution. Similarly, it is also a term closely associated with the Central Limit Theorem. The normal distribution represents a probability distribution that symmetric (having positive and negative values) …

The log-normal distribution is a term associated with statistics and probability theory. Similarly, another name for the log-normal distribution is Galton distribution. The log-normal distribution represents a continuous distribution of random variables with normally distributed logarithms. It follows the concept that instead of having normally distributed original data, the logarithms …

The random walk is a phenomenon used in statistics, which suggests a variable follows no discernible trend and moves at random. It also has an application in trading and finance. In the case of investing, the theory suggests that the changes in stock prices are independent of each other and …

Regression analysis consists of a set of statistical methods often used to estimate the relationship between two variables, one independent and the other dependent. It is a useful tool in several cases, especially for modeling and forecasting. Mostly used in statistics, regression analysis can also be beneficial in finance and …

A tool that investors commonly use to determine the direction of a trend is the moving average. It shows a summary of the data points of financial securities over a specific time. Similarly, it calculates the average for it by dividing the total by the number of data points. The …

Correlation analysis is a tool used to test the relationship between various variables, either quantitative or categorical. It measures how these variables affect each other. Through analyzing the correlation between different variables, making predictions or estimates on future behaviours becomes less complex. When it comes to investing and finance, correlation …

The yield curve is a line that shows the yields of bonds that have different maturities. It helps investors graph the yields of multiple bonds to estimate future interest rate changes and economic activity. When it comes to the curves plotted on the graph, investors can get three shapes. The …

The Price-to-Cash flow (P/CF) ratio is a metric that compares the prices of a company’s stock with its operating cash flows. While it is not as popular as the Price-to-Earnings (P/E) ratio, it is still a valuable tool that investors have at their discretion. It is one of the many …

Investors can use various ratios to calculate the value of their investments. Each of them illustrates a different aspect of the investment, which can help investors in their decision-making. Among these, one ratio is the price-to-book (P/B) ratio. What is the Price-to-Book Ratio? The price-to-book ratio is a comparison of …

The easiest method for investors to generate income from their investments is to invest in risk-free instruments. It allows investors to earn money without having to take risks. However, the returns on these investments are lower as compared to others. If investors want to make higher returns, they must accept …