ACCA Applied Skills · Performance Management · Big data and data analytics
A logistics company finds that delivery delays are strongly correlated with days when ice-cream sales are high. A manager proposes cutting ice-cream promotions to reduce delays. Which limitation of data analytics does this best illustrate?
This illustrates confusing correlation with causation. Delays and ice-cream sales move together, probably because of a third factor such as weather or traffic, so cutting promotions would not reduce delays. Analytics results need interpretation before decisions are based on them.
- AConfusing correlation with causationCorrect
- BData being held in too few formats
- CLack of processing speed
- DAnalytics only working on structured data
Explanation
A statistical correlation does not prove one variable causes the other; both are probably driven by a third factor such as hot weather and heavy traffic. Acting on the correlation as if causal would be flawed.
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