Dr. Viorel Mihailescu

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The Correlation Coefficient: Definition
Bruce Ratner, Ph.D.

The correlation coefficient, denoted by r, is a measure of the strength of the straight-line or linear relationship between two variables. The correlation coefficient takes on values ranging between +1 and -1. The following points are the accepted guidelines for interpreting the correlation coefficient:

0 indicates no linear relationship.
+1 indicates a perfect positive linear relationship: as one variable increases in its values, the other variable also increases in its values via an exact linear rule. -1 indicates a perfect negative linear relationship: as one variable increases in its values, the other variable decreases in its values via an exact linear rule. Values between 0 and 0.3 (0 and -0.3) indicate a weak positive (negative) linear relationship via a shaky linear rule. Values between 0.3 and 0.7 (0.3 and -0.7) indicate a moderate positive (negative) linear relationship via a fuzzy-firm linear rule. Values between 0.7 and 1.0 (-0.7 and -1.0) indicate a strong positive (negative) linear relationship via a firm linear rule. The value of r squared is typically taken as “the percent of variation in one variable explained by the other variable,” or “the percent of variation shared between the two variables.” Linearity Assumption. The correlation coefficient requires that the underlying relationship between the two variables under consideration is linear. If the relationship is known to be linear, or the observed pattern between the two variables appears to be linear, then the correlation coefficient provides a reliable measure of the strength of the linear relationship. If...
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