The Purpose Of The Correlation Coefficient

Correlation quantifies the strength of the association between two variables, but regression analysis try to find the nature of association between the variables.  Therefore, the purpose of correlation analysis is the determination of the degree of relationship between the variables and regression analysis attempts to establish the nature of the relationship between the variables.

A correlation coefficient reveals degree of relationship between two variables. It can vary between -1 and +1. If the two variables move together in the same direction the correlation is positive and when the relation becomes perfect the value of correlation coefficient becomes +1. If the two variables move in the opposite direction the correlation is negative and it approaches -1 when the negative relation is perfect. If there is no relation between the two variables, correlation becomes zero.

Reference:

Sekaran, U. (2003). Research methods for business: A skill-building approach (4th ed.). New York, NY: John Wiley & Sons.

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