Discuss how you might map correlation values from the interval [?1,1] to the interval [0,1]. Note that the type of transformation that you use might depend on the application that you have in mind. Thus, consider two applications: clustering time series and predicting the behavior of one time series given another.
What will be an ideal response?
For time series clustering, time series with relatively high positive correlation
should be put together. For this purpose, the following transformation would
be appropriate:
sim =
corr if corr ? 0
0 if corr < 0
For predicting the behavior of one time series from another, it is necessary to
consider strong negative, as well as strong positive, correlation. In this case,
the following transformation, sim = |corr| might be appropriate. Note that
this assumes that you only want to predict magnitude, not direction.
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