Meant by “dot product between random variables?”

correlationcovarianceinner-productsrandom variablesstatistics

I was having a discussion with a colleague today about correlation coefficients, and I was told that correlation coefficient between 2 random variables $X$ and $Y$ is proportional to the dot product of the two random variables.

I asked him what he means by this, and I was told that you can view random variables as vectors. I don't think I agree with that, but I don't have a sufficient background to really argue my point, but now I want to revisit this.

How can a random variable be viewed a vector? What is meant by dot product between 2 random variables — is this actually formal terminology or something loosely used?

Best Answer

The space $L^0(\Omega)$ of all random variables on a fixed sample space $\Omega$ is a vector space - the (outcome-wise) sum of two random variables is a random variable, and a scalar multiple of a random variable is again a random variable. So in that sense, random variables can be viewed as "vectors" because they are the elements of a vector space.

By "dot product" they likely mean the $L^2$ inner product, defined by $\langle X, Y \rangle = E[XY]$. This obeys the same basic algebraic properties as the ordinary Euclidean dot product: bilinear (with respect to the addition and scalar multiplication described above), symmetric, positive definite. Strictly speaking, this inner product doesn't necessarily live on $L^0(\Omega)$, but rather on the vector subspace $L^2(\Omega) \subset L^0(\Omega)$ consisting of random variables with finite second moment.

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