How to build a correlation matrix in Python

Suppose you have an array of data, stocks returns for instance, and you are wondering whether there is some degree of correlation. If you are using Python then it is easy to plug in your data and do some simple calculations.

Here is a simple example of a correlation matrix using Python. This matrix shows the correlation between 10 variables (10x10 matrix): as you can see, the correlation of a variable with itself is 1 as expected.

By entering more variables into the calculation the matrix becomes more difficult to interpret although it remains quite nice to visualize. Here below is an example of a 50x50 matrix.

The code I used is really simple, you can find it here below. Basically I built a random array with 10/50 data points and then used the numpy function “corrcoef” which handles all the troubles of building a matrix in an elegant way.