If the value of the variables varies in such a way that fluctuation in one is accompanied by the fluctuation in the other, these variable are said to be correlation. Generally it is observed that rises in prices of a commodity, reduce the demand and vice-versa.

TYPES OF CORRELATION

• Positive and Negative correlation
• Linear and Non linear correlation
• Simple partial and multiple correlations

Degree of correlation

+Ve -Ve
Perfect + -1
High +.75 to +1 -.75 to -1
Moderate +.25 to .75  -.25 to -.75
How  +0 to+.25 -0 to -.25
Absence  0 0

Methods-of-Determining-Correlation

1. Scatter Diagram Method:- It is a graphic device for finding correlation between two variables one variable, are independent variable is to be shown on x axis, other variable usually a dependent one is to be shower y axis, the movement of the pairs of these variables are plotted on the graph paper by dots on it.
2. Simple Graphic method:- We obtain curve one for x variable and another for y variable. If both the curves drawn are closes to each other, there is high degree of correlation.
3. Karl Pearsons coefficient of correlation
4. Spearmans Rank Difference method
5. Concurrent Deviation method