Which of the following statements about correlation is true?
A) we say there is a positive correlation between x and y if there is no distinct pattern in the scatterplot.
B) we say that there is a positive correlation between x and y if the x-values increase as the corresponding y-values increase.
C) we say that there is a positive correlation between x and y if the x-vales increase as the corresponding y-values decrease.
D) we say that there is a negative correlation between x and y if the x-values increase as the corresponding y-values increase.
Correlation Analysis helps in determining the degree and direction of relationship between two variables. It only reflects relationship between two variables but not the cause and effect relationships among them. Correlation coefficients are used to measure how strong a relationship is between two variables.
The correlation coefficient which is denoted by ‘r’ ranges between -1 and +1. If the value of ‘r’ is positive then it indicates positive correlation which means that if one of the variable increases then another variable also increases. If the value of ‘r’ is negative then it indicates negative correlation which means that if one of the variable decreases then another variable also decreases.
Importance of Correlation
Correlation Analysis is very important in various field of study like economics, research , business studies, etc. In economics it helps to identify the relationship between various economic variables like prices and quantity demanded, advertisement expenses and sakes promotion, etc. Various researches that are conducted as a part of social sciences the correlation analysis helps in arriving at very important conclusion. Correlation analysis helps to figure out how significantly the variables are correlated among each other.
Methods of Studying Correlation
- Scatter Diagram Method
- Karl Pearson’s Correlation Coefficient
Calculation of Correlation Coefficient
- Direct Method
- Actual Mean Method
- Short-cut Method/Assumed Mean Method
- Step-Deviation Method