When two sets of data are strongly linked.
If a stock has a correlation coefficient of 1, it indicates a 100% correlation with the stock market. If the stock market goes up 20% you can expect your stock to go up 20%. If a stock has a correlation of -1, it means that if the stock market goes up by 20% your stock will go down 20%. If your stock has a correlation of 0, that means the movement of the stock market has no effect on the price of your stock. The correlation coefficient tells you if changes in one item will predict changes in another.