If two variables x and y move in the same direction, we say that there is a positive correlation between them.

**TYPES OF
CORRELATION**

**Positive correlation**

If two variables x and y move in
the same direction, we say that there is a positive correlation between them.
In this case, when the value of one variable increases, the value of the other
variable also increases and when the value of one variable decreases, the value
of the other variable also decreases. Eg. The age and height of a child.

**Negative correlation**

If two variables x and y move in
opposite directions, we say that there is a negative correlation between them.
i.e., when the value of one variable increases, the value of the other variable
decreases and vice versa. Eg. The price and demand of a normal good.

The following diagrams illustrate positive and
negative correlations between x and y.

**Perfect Positive Correlation**

If changes in two variables are
in the same direction and the changes are in equal proportion, we say that
there is a perfect positive correlation between them.

**Perfect Negative Correlation**

If changes in two variables are
in opposite directions and the absolute values of changes are in equal
proportion, we say that there is a perfect negative correlation between them.

*Zero
Correlation*

If
there is no relationship between the two variables, then the variables are said
to be independent. In this case the correlation between the two variables is
zero.**Linear Correlation**

If the quantum of change in one
variable always bears a constant ratio to the quantum of change in the other
variable, we say that the two variables have a linear correlation between them. *Coefficient
of Correlation*

The coefficient of correlation
between two variables X, Y is a measure of the degree of association (i.e.,
strength of relationship) between them. The coefficient of correlation is
usually denoted by ‘r’. **Karl Pearson’s Coefficient Of Simple Correlation:**

Let N denote the number of pairs of observations of
two variables X and Y. The correlation coefficient r between X and Y is defined
by

This formula is suitable for solving problems with
hand calculators. To apply this formula, we have to calculate ∑ X,∑Y, ∑XY, ∑X2,
∑Y2.

Tags : Research Methodology - Correlation And Regression Analysis

Last 30 days 1485 views