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CA Foundation · Quantitative Aptitude · Correlation and Regression

In a scatter diagram plotted for the monthly electricity bill (₹) of 40 households in Pune against the number of air-conditioner hours used, the points rise from the lower left to the upper right and cluster tightly around an imaginary straight line. What does this indicate about the correlation?

The scatter indicates high positive linear correlation. An upward-sloping pattern from lower left to upper right means both variables increase together, and tight clustering around a straight line shows the linear relationship is strong. A downward slope would indicate negative correlation instead.

  1. AHigh positive linear correlationCorrect
  2. BHigh negative linear correlation
  3. CZero correlation
  4. DPerfect negative correlation

Explanation

Points that rise from lower left to upper right show that both variables move in the same direction, so correlation is positive. Tight clustering around a straight line shows the linear relationship is strong. A negative pattern would slope downward from upper left to lower right.

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