Outlier
A day far outside the joint pattern of two investments' returns.
A day both fell 4% is ordinary for a correlated pair; one up 4% while the other fell 4% is not. The distance used here measures how unusual the two returns were TOGETHER, which neither return alone can show.
Formula
D² = (r − r̄)ᵀ S⁻¹ (r − r̄) (S = the pair's covariance)
How to read it
A correlation that changes a lot without its outliers rests on a few days.
In Kereon
Charts · Correlation. Squared Mahalanobis distance from the pair's own mean under its own covariance, flagged above 13.8 — the 99.9% point of a chi-squared with two degrees of freedom. Pearson's r is shown again without them.
Also called: outlier, outliers.