Correlation expresses the extent to which two variables change together at a constant rate without implying causation. It helps determine the relationship between variables and enables future planning through understanding the nature and degree of relationships. Correlation analysis makes forecasting more reliable by basing it on prior analysis of variable relationships. Scatter diagrams plot variable pairs to visualize their correlation, with different patterns indicating varying degrees and types of correlation from perfect to none.

1. Corrrelation

2. Meaning
Correlation is a statistical measure that expresses the extent to which
two variables are linearly related (meaning they change together at a
constant rate). It’s a common tool for describing simple relationships
without making a statement about cause and effect.

3. Importance of Correlation
(i) Correlation helps us in determining the degree of relationship between
variables. It enables us to make our decision for the future course of
actions.
(ii) Correlation analysis helps us in understanding the nature and degree of
relationship which can be used for future planning and forecasting.
(iii) Forecasting without any prior correlation analysis may prove to be
defective, less reliable and more uncertain. If it is based upon the result of
correlation analysis, it will be more reliable.

4. Types of Correlation
1. Positive Correlation
2. Negative Correlation
3. Zero Correlation

5. Scatter Diagram Method
The Scatter Diagram Method is the simplest method to study the
correlation between two variables wherein the values for each pair of
a variable is plotted on a graph in the form of dots thereby obtaining
as many points as the number of observations. Then by looking at the
scatter of several points, the degree of correlation is ascertained.

6. Types of Scatter Diagram
1.Perfect Positive
Correlation
1.Perfect Negative
Correlation
1.High Degree of Positive
Correlation

7. 4.High Degree of
Negative Correlation
4.Low Degree of
Positive Correlation
4.Low Degree of
Negative Correlation 4.No Correlation

8. Thank You