Scatter diagram is a graphic method of studying correlation.To construct a scatter diagram, X
variable is taken on X-axis and Y variable is taken on Y-axis. The cluster of points, so plotted is » referred to as a scatter diagram. In a scatter diagram, the degree of closeness of scatter points and their overall direction gies us an idea of the nature of the relationship.
(i) If the dots move; from left, to rightwards, correlation is said to be positive whereas the movement of dots from left to right downwards indicates negative correlation.
(ii) Dots in a straight line indicate perfect correlation.
(iii) Dots falling close to each other in a straight line indicate high degree of correlation.