Unformatted text preview: he change in one variable is not accompanied
by a constant ratio of change in the other variable. In case of non-linear
correlation, points of correlation plotted on a graph do not give a straight
line. It is called curvilinear correlation because graph of such correlation
results in a curve.
Simple, Partial and Multiple Correlations
Simple correlation studies relationship between two variables only. For
instance, correlation between price and demand is simple as only two
variables are studied in this case. Multiple correlation studies relationship of
one variable with many variables. For instance, correlation of agricultural
production with rainfall, fertilizer use and seed quality is a multiple
correlation. Partial correlation studies the relationship of a variable with one
of the many variables with which it is related. For instance, seed quality,
temperature and rainfall are three variables, which determine yield of a crop.
In this case, yield and rainfall is a partial correlation.
Utility of Correlation
Study of correlation is of immense practical use in business and economics. Correlation analysis enables us to measure the magnitude of
relationship existing between variables under study. Once we establish correlation, we can estimate the value of one variable
on the basis of the other. This is done with the help of regression
equations. Sikkim Manipal University Page No. 204 Research Methodology Unit 11 The correlation study is useful for formulation of economic policies. In
economics, we are interested in finding the important dependant
variables on the basis of independent variable. Correlation study helps us to make relatively more dependable forecasts Methods of Studying Correlation
Following methods are used in the study of correlation: Scatter diagram Karl Pearson method of Correlation Spearman’s Rank correlation method Concurrent Deviation method Scatter Diagram
This is a graphical method of studying correlation between two variables. In
scatter diagram, one variable is measured on the x-axis and the other is
measured on the y-axis of the graph. Each pair of values is plotted on the
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This note was uploaded on 04/15/2010 for the course MBA mba taught by Professor Smu during the Spring '10 term at Manipal University.
- Spring '10