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Correlation and regression
What does the correlation coefficient measure?
The correlation coefficient measures the strength and direction of the linear relationship between two variables, ranging from -1 to +1.
What is the formula for Karl Pearson's correlation coefficient?
r = Σ(dx·dy) / √(Σdx² × Σdy²)
What is a positive correlation in the context of banking data?
A positive correlation means that as one variable increases (e.g., credit score), the other variable also increases (e.g., loan repayment rate), indicating a direct relationship.
What type of correlation exists when both variables increase together?
Positive correlation exists when both variables increase together.
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