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Correlation, Correlation is a statistical tool used to study the relationship between two or more, variables. Two variables are said to be correlated if the change in one variable, there will change in other variable. On the other hand if the change in one variable, does not bring any change in other variable then we say that the two variables are, not correlated to each other., Definition: Correlation is defined as the study of change of Existence,, Magnitude & Direction between two or more variables., , Types of Correlation, There are three types of correlation –, 1. Positive correlation, 2. Negative correlation, 3. Linear and Non-linear correlation., 1. Positive correlation:, Two variables are said to be positively correlated when the both the, variables under study move in the same direction, i.e., if one variable increase, the, other variable should also increase and one variable decreases the other variable, should also decrease., for example: Demand and Supply, Advertisement & sales etc., 2. Negative correlation:, Two variables are said to be negatively correlated when the both the, variables under study move in the opposite direction, i.e., if one variable increase,, the other variable should decrease and one variable decreases the other variable, should Increase., for example: Quality & Quantity, Price & Demand etc.
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If change in one variable does not affect the change in other variable then we, say that there is No correlation or Zero correlation., For example: Colour of bike & its milage., 3. Linear and Non-linear correlation:, This type of correlation is represented graphically. If graph comes out to be, straight line then we say that there is linear correlation & If graph comes out to be, smooth curve then we say that there is Non- linear correlation., 60, , 35, , 50, , 30, 25, , 40, , 20, , 30, , 15, , 20, , 10, , 10, , 5, , 0, , 0, 1, , 2, , 3, , 4, , 5, , Linear Correlation, , 0, , 2, , 4, , 6, , Non-Linear Correlation, , Methods of studying correlation, Following are the three important methods of studying the correlation between the, variables –, 1. Scatter Diagram Method, 2. Karl Pearson’s Coefficient Method, 3. Spearman’s Rank Coefficient Method
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1. Scatter Diagram Method:, Scatter Diagram Method is the simplest method of studying the correlation, between two variables. In this method the values of one of the variables are, represented by X axis and other variable are represented by Y axis., i) Perfect Positive Correlation:, If all points lye in straight line, which is rising toward right, then, we say that there is perfect positive, correlation between two variable., Here r = +1, i) Perfect Negative Correlation:, If all points lye in straight line, which is falling toward right, then we, say that there is perfect negative, correlation between two variable. Here, r = -1, iii) High degree positive Correlation:, If all points lye in narrow strip, which is rising toward right, then, we say that there is High degree, positive correlation between two, variable., iv) High degree Negative correlation:, If all points lye in narrow strip, which is falling toward right, then, we say that there is high degree, negative correlation between two, variable., v) Low degree positive Correlation:, If all points lye in broad strip, which is rising toward right, then, we say that there is Low degree, positive correlation between two, variable.
