In: Operations Management
To some extent , the statement is Misleading.It doesnot imply causation .
1.Correlation is used in the sense of mutual dependense of two or more variables yet it is not at all necessary that it should always be so. High degree of correlation between the two variables does not always necessary indicate the cause and effect relationship between them.
Example: Heat and temperature may be correlated to ecah other because heat causes the high temperature.this is cause and affect relationship, biut according to social science such relationship marely seenbecause in social science ther is Numerous Causation. A variable is affected by a large number of factors whose individual effects cannot be isolated.
2. Correlated variable are being affected by the third or more than one variables: example price of rice or jute have been affected by their production which in turn affected from rain.
3. Related variables may be affected each other so that neither of themm could be assigned as Cause and effect. example demand and price are proportional obvious. if the price (cause)of the product goes up then the demand (effect)goes down.
4. Correlation may be random or chance matters when small sample is chosen from large universe.