If changes in one variable affect the other variable then these variables are known as correlated. Like temperature and cold. If temperature increase then cold decrease and if temperature decrease then cold increase. So any change in temperature also affect cold. So Temperature and cold are known as correlated.
Types of Correlation:-
1. Positive Correlation: – If same change in both variables then these variables are known as positively correlated. That is if increase in X also increase Y or if decrease in X also decrease Y
Then X and Y are known as positively correlated.
Eg. Production and sales
2. Negative Correlation:- If opposite change in both variables then these variables are known as negatively correlated. That is if increase in X decrease Y or if decrease in X increase Y
then X and Y are known as negatively correlated.
Eg. Price and Demand
Correlation coefficient is amount of measure of correlation between X and Y. It is represented by r.
It ranges from -1 to 1.
Value of r Type of correlation
1 Perfect positive correlation
.75 to .99 High positive correlation
.25 to .74 Medium positive correlation
.01 to .24 Low positive correlation
0 No correlation
-.01 to -.24 Low negative correlation
-.25 to -.74 Medium negative correlation
-.75 to -.99 High negative correlation
-1 Perfect negative correlation