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Correlation

Correlation describes how variables vary together. A positive relationship means higher values of one tend to accompany higher values of the other; a negative relationship means they tend to move in opposite directions. A correlation coefficient describes a particular form of association, usually linear for Pearson’s coefficient. Association does not establish causation, and a zero linear correlation does not rule out all relationships. Examine graphs, business context and data quality before using a relationship for prediction.

Worked example

Ice-cream sales and outdoor temperature may rise together. Temperature can help explain sales, but correlation alone does not prove a particular causal mechanism or ensure the relationship remains stable after a change in product or location.

Common mistake

Claiming one variable causes the other solely because they move together.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027