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CA Foundation · Quantitative Aptitude · Correlation and Regression

In a scatter diagram drawn for the monthly electricity bill and the number of air conditioners used in 40 Delhi households, the plotted points rise from the lower left to the upper right and lie very close to a straight line. What does this indicate about the correlation?

The scatter diagram indicates a high degree of positive linear correlation. Points moving upward from left to right mean both variables increase together, and their closeness to a straight line shows the linear relationship is strong, though not necessarily perfect.

  1. APerfect negative correlation
  2. BHigh degree of positive linear correlationCorrect
  3. CZero correlation
  4. DHigh degree of negative linear correlation

Explanation

Points rising from lower left to upper right show that X and Y move in the same direction, so correlation is positive. Points lying very close to a straight line show a high degree of linearity. Hence it is a high degree of positive linear correlation, not negative.

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