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Correlation — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsCorrelation6 Marks
Question
Explain different types of correlation.
✓

Answer

Through the coefficient of correlation, we can measure the degree or extent of the correlation between two variables. On the basis of the coefficient of correlation we can also determine whether the correlation is positive or negative and also its degree or extent.
Perfect correlation: If two variables changes in the same direction and in the same proportion, the correlation between the two is perfect positive. According to Karl Pearson the coefficient of correlation in this case is +1. On the other hand if the variables change in the opposite direction and in the same proportion, the correlation is perfect negative. its coefficient of correlation is -1. In practice we rarely come across these types of correlations.
Absence of correlation: If two series of two variables exhibit no relations between them or change in variable does not lead to a change in the other variable, then we can firmly say that there is no correlation or absurd correlation between the two variables. In such a case the coefficient of correlation is 0.
Limited degrees of correlation: If two variables are not perfectly correlated or is there a perfect absence of correlation, then we term the correlation as Limited correlation. It may be positive, negative or zero but lies with the limits $\pm1.$
High degree, moderate degree or low degree are the three categories of this kind of correlation. The following table reveals the effect (or degree) of coefficient or correlation.

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