Post on 31-Dec-2015
• In probability theory and statistics, correlation (often measured as a correlation coefficient) indicates the strength and direction of a linear relationship between two random variables.
Strong Positive Correlation:- strong trend, LOB has a positive slope
Weak Positive Correlation- not a strong trend, LOB has a positive slope
A correlation coefficient is a number between -1 and +1 which measures the degree to which two variables are linearly related.
The closer the value is to 1.0, the stronger the relationship.
The closer the value is to 0.0, the weaker the relationship.
Positive and negative just define slope.
0.80-1.00 Strong Association between Variables
0.60-0.79 Strong-Moderate Association
0.40-0.59 Weak-Moderate Association
0.30-0.39 Strong-Weak Association
0.20-0.29 Weak-Weak Association
0.00-0.19 Little, if any association
Coefficient of Determination
r2 represents the fraction of variability in y that can be explained by the variability in x.
For example, if r2 = 0.44, this means that 44% of the variation of the dependant variable is due to the variation in the independent variable.