Positive Correlation: What It Is, How to Measure It, Examples

What is correlation in data analysis? Correlation is a statistical measure that describes the relationship between two variables. In finance, correlation is often used to measure the relationship between two assets, such as stocks or bonds. For example, a high positive correlation between two stocks may indicate that they tend to move in the same direction, while a high negative correlation may indicate that they tend to move in opposite directions.

##### Which of the following observations is an example of a positive correlation?

Observation 1: As the stock market goes up, the number of new houses being built increases.

Observation 2: As the number of new houses being built increases, the stock market goes up.

Observation 3: As the number of new houses being built decreases, the stock market goes down.

Observation 4: As the stock market goes down, the number of new houses being built decreases.

Observation 2 is an example of a positive correlation.

#### What are the 5 types of correlation?

1. Positive Correlation: A positive correlation exists when two variables move in the same direction. In other words, as one variable increases, the other variable also increases. An example of this would be the relationship between the amount of money someone makes and the number of hours they work. The more hours someone works, the more money they are likely to make.

2. Negative Correlation: A negative correlation exists when two variables move in opposite directions. In other words, as one variable increases, the other variable decreases. An example of this would be the relationship between the amount of money someone spends and the amount of money they have. The less money someone has, the less money they are likely to spend.

3. Linear Correlation: A linear correlation exists when two variables are directly proportional to each other. In other words, the relationship between the two variables can be described by a straight line. An example of this would be the relationship between the amount of money someone makes and the number of hours they work. The more hours someone works, the more money they are likely to make, and the relationship between the two variables can be described by a straight line.

4. Non-linear Correlation: A non-linear correlation exists when two variables are not directly proportional to each other. In other words, the relationship between the two variables cannot be described by a straight line. An example of this would be the relationship between the amount of money someone spends and the amount of money they have. The less money someone has, the less money they are likely to spend, but the relationship between the two variables is not a straight line.

5. No Correlation: No correlation exists when there is no relationship between two variables. An example of this would be the relationship between the amount of money someone spends and the color of their hair. There is no relationship between the two variables, and therefore, there is no correlation. What is another term for a negative correlation? The other term for a negative correlation is "inverse correlation."

What is an example of a positive and negative correlation? A positive correlation is a relationship between two variables in which both variables move in the same direction. An example of this would be if the price of a stock rose, the number of shares traded would also increase.

A negative correlation is a relationship between two variables in which the two variables move in opposite directions. An example of this would be if the price of a stock fell, the number of shares traded would decrease.