Negative Correlation

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DEFINITION of 'Negative Correlation'

A relationship between two variables in which one variable increases as the other decreases, and vice versa. In statistics, a perfect negative correlation is represented by the value -1.00, while a 0.00 indicates no correlation and a +1.00 indicates a perfect positive correlation. A perfect negative correlation means that the relationship that appears to exist between two variables is negative 100% of the time. It is also possible that two variables may be negatively correlated in some, but not all, cases.

INVESTOPEDIA EXPLAINS'Negative Correlation'

Here are a few examples of a negative correlation: The more time I spend at the mall, the less money I have in my checking account. The higher my mutual fund's expense ratio, the lower my investment returns. The more hours I spend at the office, the less time I spend with my family.

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RELATED FAQS
  1. How are negative correlations used in risk management?

    Negative correlation is a statistical measure used to describe a relationship between two variables. When two variables are ... Read Full Answer >>
  2. What is the difference between positive correlation and inverse correlation?

    In the field of statistics, positive correlation describes the relationship between two variables which change together, ... Read Full Answer >>
  3. How should I interpret a negative correlation?

    A negative correlation between two variables means that one variable increases whenever the other decreases. This relationship ... Read Full Answer >>
  4. Does a negative correlation between two stocks mean anything?

    Negative correlation with regard to stocks means two individual stocks have a statistical relationship such that they generally ... Read Full Answer >>
  5. Why is there a negative correlation between quantity demanded and price?

    The law of demand is an economic principle that explains the negative correlation between the price of a good or service ... Read Full Answer >>
  6. What does it mean if the correlation coefficient is positive, negative, or zero?

    The correlation coefficient measures the robustness of the relationship between two variables. Pearson's correlation coefficient ... Read Full Answer >>
  7. Are oil prices and interest rates correlated?

    Yes. No. Maybe. Definitely. There's no easy answer to this question. While many theories abound, the reality is that oil ... Read Full Answer >>
  8. What is the correlation between American stock prices and the value of the U.S. dollar?

    The correlation between any two variables (or sets of variables) summarizes a relationship, whether or not there is any real-world ... Read Full Answer >>
  9. Is there a correlation between inflation and house prices?

    There is a correlation between inflation and house prices - in fact there are correlations between inflation and any good ... Read Full Answer >>
  10. What is the relationship between oil prices and inflation?

    The price of oil and inflation are often seen as being connected in a cause and effect relationship. As oil prices move up ... Read Full Answer >>

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