Question

Explain the concept of correlation and how to interpret correlation coefficients of 0.3, 0 and -0.95.

Answer 1

The concept of correlation is related to the degree of association between any two variable. More specifically, the coefficient of correlation measures the degree of linear association between any two variables. The value of correlation coefficient varies between -1 to 1, where the values of -1 and 1 imply a very strong association between the variables and a value of zero implies no association. The sign positive or negative of the correlation coefficient shows the direction of relationship between the two variables.

A value of 0.3 implies a moderate degree of association between the variables and since the sign is positive it means both the variables are changing more or less in the same direction.

A value of 0 implies zero degree of association between the variables.

A value of -0.95 implies a very strong degree of association between the variables and since the sign is negative it means both the variables are changing mostly in the opposite direction.