Negative Correlation

Definition

Negative correlation refers to a relationship between two variables where as one variable increases, the other variable decreases, and vice versa. It indicates an inverse or opposing relationship between the variables.

5 Must Know Facts For Your Next Test

1. In a negative correlation, the correlation coefficient (r) will have a negative value, indicating an inverse relationship between the variables.
2. Negatively correlated variables tend to move in opposite directions, with one variable increasing as the other decreases.
3. The strength of a negative correlation is measured by the absolute value of the correlation coefficient, with values closer to -1 indicating a stronger relationship.
4. Negative correlation can be observed in various real-world scenarios, such as the relationship between price and demand, or the relationship between exercise and weight.
5. Understanding negative correlation is crucial in interpreting scatter plots and making informed decisions based on the relationship between variables.

Review Questions

• Explain how a negative correlation can be visually represented in a scatter plot.
  • In a scatter plot, a negative correlation is visually represented by a downward-sloping trend line. As one variable increases, the other variable decreases, and the data points form a pattern that slopes from the top left to the bottom right of the plot. The closer the data points are to a straight line, the stronger the negative correlation between the variables.
• Describe the relationship between the correlation coefficient and the strength of a negative correlation.
  • The correlation coefficient (r) is a statistical measure that indicates the strength and direction of the linear relationship between two variables. In the case of a negative correlation, the correlation coefficient will have a negative value, ranging from -1 to 0. The closer the correlation coefficient is to -1, the stronger the negative correlation, meaning the variables have a stronger inverse relationship. Conversely, a correlation coefficient closer to 0 indicates a weaker negative correlation.
• Analyze the implications of a strong negative correlation between two variables in the context of decision-making.
  • A strong negative correlation between two variables suggests that as one variable increases, the other variable decreases in a predictable manner. This information can be valuable in decision-making processes, as it allows for anticipating and planning for the potential consequences of changes in one variable. For example, if there is a strong negative correlation between the price of a product and the demand for that product, a business can use this knowledge to adjust pricing strategies, production plans, and inventory management to optimize profitability. Understanding the implications of negative correlation can help individuals and organizations make more informed and effective decisions.

Related terms

Correlation Coefficient: A statistical measure that indicates the strength and direction of the linear relationship between two variables, ranging from -1 to 1.

Scatter Plot: A graphical representation of the relationship between two variables, where the values of one variable are plotted against the values of the other variable.

Linear Regression: A statistical technique used to model the linear relationship between a dependent variable and one or more independent variables.