Define correlation?
Correlation
indicates the relationship between two or more variables of a series, so that the
changes in the values of one variable are associated with changes in values of
other variables.
Generally,
there are three types of correlation-
(1) Positive,
Negative and Zero correlation,
(2) Simple,
Multiple and Partial Correlation,
(3) Linear
and Non Linear Correlation.
1.(i)
Positive Correlation: When two or more variables move in the same direction or
when there is positive relationship between the variables then it is called Positive
correlation. For Example- Price and quantity supply are positively correlated.
Price (In Rs) Supply
1 2
2 3
3 4
4 5
(ii)
Negative Correlation: When the variables move in the opposite direction i.e.
when there is negative relationship between the variables then it is called
negative correlation. As for example-
Price and
Quantity demand are negatively correlated (or height and weight or Price and
demand of a commodity).
Price (In Rs) Demand
1 5
2 4
3 3
4 2
(iii) Zero
Correlation: When there is no relationship between the variables then it is
called Zero Correlation. For example- Price of a commodity and height of a
student.
2.(i) Simple
Correlation: When we study the relationship between two variables only then it
is called Simple Correlation. As for example- Income and Expenditure of a
family.
(ii)
Multiple Correlation: When we study the relationship between three or more
variables simultaneously then it is called Multiple Correlation. As for example-
When we
study the relationship between production of rice on one side and amount of
rainfall, amount of fertilizer and quality of land on the other hand.
(iii)
Partial Correlation: When there are multiple variables but we study the
correlation between two variables only, keeping all other variables constant
then it is called Partial Correlation. For example- Here if we assumed, Income
(Y) and Test (T) are constant and we study the relationship between price and
demand only.
3.(i) Linear
Correlation: If the change in the value of one variable tends to the change a
constant ratio to the amount of other variable then it is called Linear
Correlation. If the values of such variables are plotted on a draft then it
makes street line. For example-
Price (in Rs) Supply (in Kg)
2 2
4 4
6 6
8 8
(ii) Non Linear Correlation: If the amount of change in one variable does not bear a constant ratio to the amount of the change in other resulted variable then it is called Non linear Correlation. For example-
Price (in Rs) Supply (in Kg)
10 5
20 7
30 10
40 20
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