CORRELATION & REGRESSION
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
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What does correlation measure in statistics?
Correlation measures the degree and direction of linear relationship between two variables. It quantifies how closely two variables move together.
What is the difference between simple correlation and partial correlation?
Simple ignores other variables; partial controls for them.
What is the range of the correlation coefficient?
The correlation coefficient (r) ranges from -1 to +1. A value of +1 indicates perfect positive correlation, -1 indicates perfect negative correlation, and 0 indicates no linear relationship.
What is a spurious correlation?
False correlation caused by a third confounding variable.
What is a positive correlation in the context of banking?
Positive correlation means that as one variable increases, the other also increases. For example, loan amount and interest income tend to move in the same direction.
What does a correlation coefficient of +1 indicate?
Perfect positive linear relationship between two variables.
What is a negative correlation?
Negative correlation means that as one variable increases, the other decreases. For example, rising interest rates may negatively correlate with bond prices.
What does a correlation coefficient of -1 indicate?
Perfect negative linear relationship between two variables.
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