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
- 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.
- 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.
- Karl Pearsons coefficient of correlation
- Spearmans Rank Difference method
- Concurrent Deviation method
Author –Dr.Archna dusad