Correlation Coefficient

A measure of how closely two variables are linearly related. Generally denoted by 'r', its absolute value provides an indication of the strength of the

74 Cost relationship. The value of r varies between +1 and -1, with -1 or 1 indicating a perfect linear relationship, and r = 0 indicating no linear relationship. The sign of the correlation coefficient indicates whether the slope of the line is positive or negative when the two variables are plotted in a scatter diagram. Also known as 'Pearson's correlation coefficient' after the British statistician Karl Pearson (1857-1936). Cf. Spearman's Rank-order Correlation Coefficient.

Correlation does not imply causation. There is evidence that the density of the stork population is correlated with the human birth rate. The reason for the relationship is probably that both variables are related to the number of chimney stacks, which are favourite nesting sites for the birds and an indicator of the size of the human population.

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