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.


  • 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


  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




Author –Dr.Archna dusad