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
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
