Based on the nature of the relationship between the two variables, correlation can be broadly categorized into the following three types: Positive and Negative Correlation, Linear and Curvilinear Correlation, and Simple and Multiple Correlation.
Linear correlation
If the ratio for change between the two variables is constant or fixed, then the 2 variables are said to be linearly correlated.
For example, consider the following two variables P and Q.
| P | 50 | 55 | 60 | 65 | 70 | 75 |
| Q | 40 | 42 | 44 | 46 | 48 | 50 |
For every increase in the variable P by 5 units, the value of variable Q increases by 2 units. In this case, there exists a linear positive correlation between the two variables. A linear positive correlation between two variables is depicted by a positively sloped straight line graph.
| A | 70 | 60 | 50 | 40 | 30 | 20 |
| D | 55 | 50 | 45 | 40 | 35 | 30 |
Here, for every decrease in the variable A by 10 units, the variable D decreases by 5 units. In other words, there exists a linear negative correlation between the two variables. A linear negative correlation between two variables is depicted by a negatively sloped straight line graph.
Also, Read
What is Correlation?
Correlation is a statistical tool that measures the quantitative relationship between different variables. It studies the degree and intensity of the connection between the two variables. The relationship between two variables is studied with the help of a statistical tool i.e. ‘Correlation’.
What is a Positive Correlation?
A positive correlation between two variables exists when both of them move in the same direction. In other words, if with the increase in one variable, the other also increases,
What is a Negative Correlation?
One of the common examples of negative correlation in economics is the price of a commodity and its quantity demanded. As the price of a commodity rises, its demand falls and vice-versa.