Meaning of Correlation Correlation studies the relationship between two variables in which
change in the value of one variable, are associated with changes in the value of the other variable.
For example, as the summer heat rises, hillstations are crowded with more and more visitors. Ice-cream sales become more brisk. Thus, the temperature is related to number of visitors and sale, of ice-creams.
Importance of Correlation
(i) Correlation helps us in determining the degree of relationship between variables. It enables us to make our decision for the future course of actions.
(ii) Correlation analysis helps us in understanding the nature and degree of relationship which can be used for future planning and forecasting.
(iii) Forecasting without any prior correlation analysis may prove to be defective, less reliable and more uncertain. If it is based upon the result of correlation analysis, it will be more reliable.