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Correlation Definitions, Examples & Interpretation

The above result suggests that there is a moderately strong linear relationship between the online retail sales and the total retail sales.This means that as the online sales increase, the total retail sales increase as well to a greater extent.

The correlation coefficient function can be used in a variety of business environment situations.This allows us to understand the relationship between the different variables in the business environment and then to act or control one or two variables for the organization’s benefits.

One of the uses is the finding the relationship and the correlation between the management roles and the different variables such as labor productivity, sales, profitability and return on the capital employed.

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This is calculated by interviewing the managers and giving them a score on a particular scale. Then that scale is plotted against one of the factors to find the relation and correlation.

Since there is a positive strong relationship therefore, the company needs to implement better management practices to increase productivity of its labor force. Another example is that to find the correlation between the CSP (Corporate Social Performance) of a company and its financial risk. This is an important measure in the current years because social work does build a good reputation for the firm. Since higher CSP signifies lower financial risk, therefore the company needs to increase its social work in the society especially in the areas where it operates to some extent.

RESOURCES

  1. Berk R. (2004) Regression Analysis: A Constructive Critique. Sage
  2. Cohen J. (2003) Applied Multiple Regression / Correlation Analysis for the Behavioral Sciences. Lawrence Erlbaum Associates.
  3. Reinard J. (2006) Communication Research Statistics. Sage