Correlation Analysis

The degree of relationship between the variables under consideration is measured through the correlation analysis. The measure of correlation called correlation coefficient or correlation index summarizes in one figure the direction and degree of correlation. The correlation analysis refers to the techniques used in measuring the closeness of the relationship between the variables.

CORRELATION DEFINED

Some important definitions of correlation are given below:

1. “  Correlation analysis deals with the association between two or more variables.”

2. “ If two or more quantities vary in sympathy so that movements in one tend to be accompanied by corresponding movements in the other(s) then they are said to be correlated.”

Thus correlation is a statistical device which helps us in analyzing the co variation of two or more variables.

The problem of analyzing the relation  between different series should be broken down into three steps:

(1) Determining whether a relation exists and, if it does, measuring it.

(2) Testing whether it is significant.

(3) Establishing the cause and effect relation, if any.

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