Points to be discussed
➢ Correlation
❖ Concept
❖ Types of correlation
❖ Methods of correlation
❖ Example
➢ Regression
❖ Concept
❖ Types of regression equation
❖ Methods of regressions
❖ Example
❖ Difference between correlation and regression
Correlation
In today’s business world we come across many activities, which are dependent on each
other. In businesses we see large number of problems involving the use of two or more
variables. Identifying these variables and its dependency helps us in resolving the many
problems. Many times there are problems or situations where two variables seem to move
in the same direction such as both are increasing or decreasing. At times an increase in one
variable is accompanied by a decline in another. For example, family income and
expenditure, price of a product and its demand, advertisement expenditure and sales
volume etc. If two quantities vary in such a way that movements in one are accompanied by
movements in the other, then these quantities are said to be correlated.
Correlation is a statistical technique to ascertain the association or relationship between two
or more variables. Correlation analysis is a statistical technique to study the degree and
direction of relationship between two or more variables.
A correlation coefficient is a statistical measure of the degree to which changes to the value
of one variable predict change to the value of another. When the fluctuation of one variable
, reliably predicts a similar fluctuation in another variable, there’s often a tendency to think
that means that the change in one causes the change in the other.
Uses of correlations:
1. Correlation analysis helps inn deriving precisely the degree and the direction of such
relationship.
2. The effect of correlation is to reduce the range of uncertainity of our prediction. The
prediction based on correlation analysis will be more reliable and near to reality.
3. Correlation analysis contributes to the understanding of economic behaviour, aids in
locating the critically important variables on which others depend, may reveal to the
economist the connections by which disturbances spread and suggest to him the
paths through which stabilizing farces may become effective
4. Economic theory and business studies show relationships between variables like
price and quantity demanded advertising expenditure and sales promotion measures
etc.
5. The measure of coefficient of correlation is a relative measure of change.
Types of correlation
Types of Correlation: Correlation is described or classified in several different ways. Three of
the most important are:
I. Positive and Negative I
II. Simple, Partial and Multiple
III. Linear and non-linear
I. Positive, Negative and Zero Correlation:
Whether correlation is positive (direct) or negative (in-versa) would depend upon the
direction of change of the variable. Positive Correlation: If both the variables vary in the
same direction, correlation is said to be positive. It means if one variable is increasing, the
other on an average is also increasing or if one variable is decreasing, the other on an
average is also deceasing, then the correlation is said to be positive correlation.
➢ Correlation
❖ Concept
❖ Types of correlation
❖ Methods of correlation
❖ Example
➢ Regression
❖ Concept
❖ Types of regression equation
❖ Methods of regressions
❖ Example
❖ Difference between correlation and regression
Correlation
In today’s business world we come across many activities, which are dependent on each
other. In businesses we see large number of problems involving the use of two or more
variables. Identifying these variables and its dependency helps us in resolving the many
problems. Many times there are problems or situations where two variables seem to move
in the same direction such as both are increasing or decreasing. At times an increase in one
variable is accompanied by a decline in another. For example, family income and
expenditure, price of a product and its demand, advertisement expenditure and sales
volume etc. If two quantities vary in such a way that movements in one are accompanied by
movements in the other, then these quantities are said to be correlated.
Correlation is a statistical technique to ascertain the association or relationship between two
or more variables. Correlation analysis is a statistical technique to study the degree and
direction of relationship between two or more variables.
A correlation coefficient is a statistical measure of the degree to which changes to the value
of one variable predict change to the value of another. When the fluctuation of one variable
, reliably predicts a similar fluctuation in another variable, there’s often a tendency to think
that means that the change in one causes the change in the other.
Uses of correlations:
1. Correlation analysis helps inn deriving precisely the degree and the direction of such
relationship.
2. The effect of correlation is to reduce the range of uncertainity of our prediction. The
prediction based on correlation analysis will be more reliable and near to reality.
3. Correlation analysis contributes to the understanding of economic behaviour, aids in
locating the critically important variables on which others depend, may reveal to the
economist the connections by which disturbances spread and suggest to him the
paths through which stabilizing farces may become effective
4. Economic theory and business studies show relationships between variables like
price and quantity demanded advertising expenditure and sales promotion measures
etc.
5. The measure of coefficient of correlation is a relative measure of change.
Types of correlation
Types of Correlation: Correlation is described or classified in several different ways. Three of
the most important are:
I. Positive and Negative I
II. Simple, Partial and Multiple
III. Linear and non-linear
I. Positive, Negative and Zero Correlation:
Whether correlation is positive (direct) or negative (in-versa) would depend upon the
direction of change of the variable. Positive Correlation: If both the variables vary in the
same direction, correlation is said to be positive. It means if one variable is increasing, the
other on an average is also increasing or if one variable is decreasing, the other on an
average is also deceasing, then the correlation is said to be positive correlation.
