Correlation can be easily understood as co relation. To define. correlation is the average relationship between two or more variables. When the change in one variable makes or causes a change in other variable then there is a correlation between these two variables.
These correlated variables can move in the same direction or they can move in opposite direction. Not always there is a cause and effect relationship between the variables when there is a change; that might be due to uncertain change.
Simple Correlation is a correlation between two variables only; meaning the relationship between two variables. Event correlation and simple event correlation are the types of correlations mainly used in the industry point of view.
Types of Correlation
In Research Methodology of the Management, Correlation is broadly classified into six types as follows :
(1) Positive Correlation
(2) Negative Correlation
(3) Perfectly Positive Correlation
(4) Perfectly Negative Correlation
(5) Zero Correlation
(6) Linear Correlation
When two variables move in the same direction then the correlation between these two variables is said to be Positive Correlation.
When the value of one variable increases, the value of other value also increases at the same rate.
For examplethe training and performance of employees in a company.
In this type of correlation, the two variables move in the opposite direction.
When the value of a variable increases, the value of the other variable decreases.
For example, the relationship betwwen price and demand.
Perfect Positive Correlation
When there is a change in one variable, and if there is equal proportion of change in the other variable say Y in the same direction,
then these two variables are said to have a Perfect Positive Correlation.
Perfectly Negative Correlation
Between two variables X and Y, if the change in X causes the same amount of change in Y in equal proportion but in opposite direction,
then this correlation is called as Perfectly Negative Correlation.
When the two variables are independent and the change in one variable has no effect in other variable,
then the correlation between these two variable is known as Zero Correlation.
If the quantum of change in one variable has a ratio of change in the quantum of change in the other variable then it is known as Linear correlation.