The correlation coefficient is a measurement of the relationship between two quantitative or qualitative variables, such as X and Y.
There are three types of correlation coefficients. They are: Positive Correlation (0 to +1), Negative Correlation (0 to -1) and Zero Correlation (0)
Positive Correlation (0 to +1)
The direction of change between X and Y is the same in this case. Example, an increase in the quantity of a product increases the cost of the product.
Negative Correlation (0 to -1)
In this case X and Y variables changes in the opposite direction. Example: when the price of a product increases its demand decreases.
Zero Correlation (0)
In this case, there is no correlation between the variables.
The quantitative Karl Pearson correlation coefficient is represented by the symbol 'r.'
The formula for the Karl Pearson Coefficient of Correlation is as follows:
Actual mean method
Assumed mean method
Step deviation method
The Karl Pearson Coefficient Correlation is often used in mathematical methods.
This acquires a huge popularity in the calculation of any economic problem by estimating the variables for X and Y and then sorting to find the intensity between them.
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