CORRELATION
Correlation is
the statistical tool which is used to know the relationship between two or more
variables i.e., the degree to which the variables are associated with each
other. In simpler words, it measures the closeness of the relationship. For
example, price and supply, demand and supply, income and expenditure are correlated.
TYPES OF CORRELATION
There are
mainly four types of correlation. They
are,
1. Positive
correlation
2. Negative
correlation
3. Zero
correlation
4. Perfect
correlation
Positive
correlation
Positive correlation means that as one data set increases, the other
data set increases as well. For example, price of a goods and demand, hot
weather and cold drink consumptions, etc.
The line corresponding to the scatter plot is an increasing line.
Negative correlation
Negative
correlation means that as
one data set increases, the other decreases. For example, alcohol consumption
and lifeline, smart phones usages and battery lifeline, etc.
The line corresponding
to the scatter plot is a decreasing
line.
Zero correlation
Zero correlation means no correlation,
i.e., the two sets of data are not related at all. In other words, this means
that one set of data does not increase or decrease with the other. For
example, HR recruits and temperature, paper production and beverages, etc. No correlation occurs when there is no linear dependency between the
variables.
Perfect correlation
If there is any change in the
value of one variable, the value of the other variable is changed in a fixed
proportion. The correlation between them is said to be a perfect correlation.
It is indicated numerically as +1 and -1.
Perfect correlation occurs when there is a functional
dependency between the variables. In this case all the points are in a straight
line.
Perfect Positive Correlation
If the values of both the
variables move in the same direction with a fixed proportion is called a
perfect positive correlation. It is indicated numerically as +1.
Perfect
Negative Correlation
If the values of both the
variables move in opposite directions with a fixed proportion is called a
perfect negative correlation. It is indicated numerically as -1.
