Page 55 - BA2 Integrated Workbook STUDENT 2018

Analysing and predicting costs

Correlation

5.1 Types of correlation

The reliability of the analysis we have carried out depends on the strength of the
relationship between the two variables. In our line of best fit and least squares
regression examples we have assumed a strong linear relationship but this may not
always be the case. The strength of the relationship between variables is known as
correlation.

Two variables are said to be correlated if they are related to one another, or, more
precisely, if changes in the value of one tend to accompany changes in the other.
y y

ion ion

x x
Strong positive ion Strong negative ion
y y
ion ion ion ion

Perfect positive x Perfect negative x
ion ion ion ion

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