Correlation Analysis


Meaning: -- If two quantities vary in such a way that movement in one are accompanied by movement in other, these quantities are correlated. For example, there exits some relationship between age of husband and age of wife, price of commodity and amount demanded etc. The degree of relationship between variables under consideration is measured through correlation analysis. The measure of correlation called correlation coefficient. Thus,

Correlation analysis refers to the statistical techniques used in measuring the closeness of the relationship between variables.

Definition: -- According to Simpson & Kafka, “Correlation analysis deals with the association between two or more variable.”
According to Ya Lun Chou, “Correlation analysis attempts to determine the degree of relationship between variables.”
Thus correlation is a statistical device, which helps us in analysis the co-variation of two or more variables.
The problem of analysis the relation between different series should be broken down into 3 steps: - 1. Determining whether a relation exists & if it does, measuring it. 2. Testing whether it is significant.

3. Establishing the cause & effect relation, if any.

It should be noted that detection & analysis of correlation (i.e., co variation) between two statistical variables requires relationship of some sort, which associates the observation in pairs, one of each pair being a value of each of two variables. In general, the pairing relationship may be of almost any nature, such as observation at the time or place or over a period of time or different places.


The study of correlation is of immense use in statistical analysis & practical life because of following reasons: -- 1. Shows Relationship: -- Most of variables show some kind of relationship. For example, there is relationship between price & supply, income & expenditure etc. Through correlation...
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