Understanding Conditional Variance and Conditional Covariance

Conditional Variance and Conditional Covariance are concepts that are central to statistical modeling. In this article, we'll learn what they are, and we'll illustrate how to calculate them using a real-world data set. First, a quick refresher on what is variance and covariance. Variance of a random variable measures its variation around its mean. The covariance between two random variables is a measure of how correlated are their variations around their respective means.