The onboard compass measures the direction of the earth’s magnetic field. 

The compass on drones is calibrated through a simple calibration process when first setting up your device. This is done to align the drone's flight system with magnetic north. It is how the onboard navigation system manages the earth’s shifting magnetic field and establishes the local magnetic declination. (The number of degrees between magnetic and true north). It would be something familiar to any hikers who use a map and compass rather than GPS to establish bearings when navigating.

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