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CA Foundation · Quantitative Aptitude · Correlation and Regression

A analyst calculates the correlation between the monthly sales of umbrellas and monthly sales of sunscreen lotion, both for a coastal town, over 3 years and gets r = -0.7. Which description best fits this result?

The result indicates a fairly strong negative linear correlation. The negative sign shows the variables tend to move in opposite directions, and a magnitude of 0.7 is reasonably high but clearly short of the value 1 that would signal perfect correlation.

  1. APerfect negative linear correlation
  2. BFairly strong negative linear correlationCorrect
  3. CWeak negative linear correlation
  4. DPositive linear correlation

Explanation

The value -0.7 is negative, so the variables tend to move in opposite directions. Its magnitude 0.7 is well above 0.5 and far from 1, so the relationship is fairly strong but not perfect. Perfect would need r = -1, and weak would typically mean magnitude near 0.

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