Correlation Analysis - Market Research

Correlation Analysis - Market Research

Correlation analysis is a method of statistical evaluation used to study the strength of a relationship between two, numerically measured, continuous variables (e.g. height and weight). This particular type of analysis is useful when a researcher wants to establish if there are possible connectionsbetween variables. It is often misunderstood that correlation analysis determines cause and effect; however, this is not the case because other variables that are not present in the research may have impacted on the results.

If correlation is found between two variables it means that when there is a systematic change in one variable, there is also a systematic change in the other; the variables alter together over a certain period of time. If there is correlation found, depending upon the numerical values measured, this can be either positive or negative. 

• Positive correlation exists if one variable increases simultaneously with the other, i.e. the high numerical values of one variable relate to the high numerical values of the other.

• Negative correlation exists if one variable decreases when the other increases, i.e. the high numerical values of one variable relate to the low numerical values of the other.

Pearson’s product-moment coefficient is the measurement of correlation and ranges (depending on the correlation) between +1 and -1. +1 indicates the strongest positive correlation possible, and -1 indicates the strongest negative correlation possible. Therefore the closer the coefficient to either of these numbers the stronger the correlation of the data it represents. On this scale 0 indicates no correlation, hence values closer to zero highlight weaker/poorer correlation than those closer to +1/-1. 

If there is correlation between two numerical sets of data, positive or negative, the coefficient worked out can allow you to predict future trends between the two variables. However, you must remember that you cannot be 100% sure that your prediction will be correct because correlation does not determine cause or effect.