Correlation

Business, Legal & Accounting Glossary

Definition: Correlation



What is the dictionary definition of Correlation?

Dictionary Definition


  1. A reciprocal, parallel or complementary relationship between two or more comparable objects
  2. statistics One of the several measures of the linear statistical relationship between two random variables, indicating both the strength and direction of the relationship.
  3. algebra An isomorphism from a projective space to the dual of a projective space, often to the dual of itself.

Full Definition of Correlation


In statistics, correlation is an assessment of the extent of the linear relationship between two variables. A correlation coefficient is the index of the extent of the linear relationship. The most common correlation coefficient is the Pearson product-moment correlation, defined as the covariance of the two variables divided by the product of their standard deviations. The Pearson correlation coefficient is always between -1 and 1. The weaker the relationship, the closer the correlation coefficient is to 0. A positive correlation coefficient indicates a higher value for one variable tends to correspond to a higher value for the other, and a negative correlation coefficient indicates a higher value for one variable tends to correspond to a lower value for the other. Correlation is not an appropriate statistical technique for categorical data such as gender or colour. In contrast, correlation is an extremely useful technique for prices. Correlation of stock prices is a simple yet informative analysis. If two stocks have a high correlation, their prices tend to rise and fall in sync.


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Definition Sources


Definitions for Correlation are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February, 2020 | 17 Views.