In: Accounting
A Correlation is a single numerical value that describes a relationship between two things, or variables.
A correlation has two qualities: direction and strength.
The two directions of a correlation are positive and negative.
Positive or Perfect Correlation
Positive or Perfect Correlation means both variables move in the same direction. In other words, as one variable increases, the other variable also increases or vice a versa.
For Example:
1) As the temprature goes up, ice cream sales also go up
2) When an employee works more hours his paycheck increases proportionately
3) There is a positive correlation between smoking and alcohol use. As alcohal use increases, so does smoking
Negative Correlation
When two variables have a negative correlation, they have an inverse relationship. In other words, as one variable increases, the other decreases and vice versa.
Example:
1) the older a man gets, the less hair that he has
2) As whether gets colder, air conditioning costs decrease