Correlation

What is Correlation?

A relationship in which two variables tend to move together, either in the same direction or in opposite directions. Correlation shows only that an association exists in the data; it does not by itself establish that one variable causes the other, because a third factor may be driving both or the association may be coincidental.

This definition is part of the Marketing chapter in Cambridge O Level Business Studies.

Concepts related to Correlation

• cause
• third factor
• cautious conclusion

Common mistakes with Correlation

• "Sales and promotion spending both rose, so the campaign caused the increase." Correction Correlation is not cause. Sales may have risen for a seasonal reason, a competitor's stock shortage, or a price change made at the same time — or rising sales may have funded the extra promotion. What it costs The cautious conclusion in data response — the sentence that separates what the data shows from what it only suggests.