Correlation

Correlation Analysis:

                   Correlation analysis is defined as the study of relationship between variables and helps in determining the degree of relationship between variables.

Example: Relationship between price and demand,income and expenditure etc.

Types: Correlation can be broadly classified into the following types: Positive, Negative, Simple, Multiple, Partial, Linear and Curvilinear.

1. Positive correlation: When both variables are varying in the same direction (increase or decrease together), then correlation is said to be positive.
2. Negative correlation: When both variables are varying in the opposite direction(if one increases, the other decreases or vice versa), then correlation is said to be negative.
3. Simple correlation: When only two variables are studied, it is Simple correlation.
4. Multiple correlation: When more than two variables are studied simultaneously, it is Multiple correlation.
5. Partial correlation: When only two variables are studied partially,in presence of more than two variables, it is Partial correlation.
6. Linear correlation: If two variables tend to bear a constant ratio, it is Linear correlation.
7. Curvilinear correlation: If two variables donot bear a constant ratio, it is Curvilinear correlation.
8. Correlation coefficient always lies between -1 and +1.