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Correlation

Define the term Correlation and describe Correlation formula in brief.

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  • Correlation means and interrelationship or correspondence  between two variables.
  • Electricity bill and weather
  • Height and weight
  • Distance and Time
  • Demand for the product and Price

Correlation formula:

358_corelation.jpg

  • The main result of a correlation is called the correlation coefficient (or "r").
  • This ranges from -1.0 to +1.0.
  • The closer r is to +1 or -1, the more closely the two variables are related.
  • If r is close to zero (0), it means there is no relationship between the variables.
  • If r is positive, it means that as one variable gets larger the other gets larger.
  • If r is negative this means that as one gets larger, the other gets smaller (often called an "inverse" correlation).

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