What is 'Positive Correlation '
Positive correlation is a relationship between two variables in which both variables move in tandem. A positive correlation exists when one variable decreases as the other variable decreases, or one variable increases while the other increases. In statistics, a perfect positive correlation is represented by 1, while 0 indicates no correlation and negative 1 indicates a perfect negative correlation.
BREAKING DOWN 'Positive Correlation '
A perfect positive correlation means that 100% of the time, the relationship that appears to exist between two variables is positive.A positive correlation can be seen between the demand for a product and the product's associated price. In situations where the available supply stays the same, the price can often rise if demand increases. Additionally, gains or losses in certain markets may lead to similar movements in associated markets. As the price of fuel rises, the prices of airline tickets also rise. Since airplanes require fuel to operate, an increase in this cost is often passed to the consumer, leading to a positive correlation between fuel prices and airline ticket prices.
A positive correlation does not guarantee growth or benefit. Instead, it is used to denote any two or more variables that move in the same direction together, so when one increases, so does the other. While the correlation exists, causation may not; that while certain variables may move together, it may not be known why this movement occurs.
Correlation is a form of dependency, where a shift in one variable means a change is likely in the other, or that certain known variables produce specific results. A general example can be seen within complementary product demand. If the demand for vehicles rise, so will the demand for vehicularrelated services, such as new tires. An increase in one area has an effect on complementary industries.
Positive Correlation in Finance
A simple example of positive correlation involves the use of an interestbearing savings account with a set interest rate. The more money that is added to the account, whether through new deposits or earned interest, the more interest that can be accrued. Similarly, a rise in interest rate will correlate with a rise in interest generated, while a decrease in interest rate causes a decrease in actual interest accrued.
Psychology and Positive Correlation
In certain situations, positive psychological responses can cause positive changes within an area. This can be demonstrated within the financial market in cases where general positive news about a company leads to higher stock sales.

Negative Correlation
A relationship between two variables in which one variable increases ... 
Correlation Coefficient
A measure that determines the degree to which two variable's ... 
Inverse Correlation
A contrary relationship between two variables such that they ... 
Serial Correlation
The relationship between a given variable and itself over various ... 
Cluster Analysis
An investment approach that places securities into groups based ... 
Variable Cost Ratio
Variable costs expressed as a percentage of sales. The variable ...

Investing
Correlation
In the world of finance, correlation is a statistical measure of how two securities move in relation to each other. 
Financial Advisor
4 Reasons Why Market Correlation Matters
Learn about how correlation can be used to measure how broader markets move in relation to each other. See how correlation is used to manage risk. 
Trading
Using Currency Correlations To Your Advantage
Knowing the relationships between pairs can help control risk exposure and maximize profits. 
Investing
What's the Correlation Coefficient?
The correlation coefficient is a measure of how closely two variables move in relation to one another. If one variable goes up by a certain amount, the correlation coefficient indicates which ... 
Investing
Understanding the Oil & Gas Price Correlation
Learn how the correlation between the commodity prices for natural gas and oil changed from 2004 to 2015 due to increased natural gas production. 
Investing
How To Trade Currency And Commodity Correlations
Relationships between currencies and commodities exist throughout the financial markets. Find out how to trade these trends. 
Insights
Understanding Regression
Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable. 
Investing
Explaining Autocorrelation
Autocorrelation is the measure of an internal correlation with a given time series. 
Investing
Diversification: Protecting Portfolios From Mass Destruction
This investing strategy retains its charm as a protection against random events in the market.

How should I interpret a negative correlation?
Learn more about correlation and how businesses analyze variables. Find out how negative correlations are interpreted by ... Read Answer >> 
What are some examples of positive correlation in economics?
Learn the most common examples of positive correlation in microeconomics and microeconomics, including demand and price, ... Read Answer >> 
How do I find positive correlation in the stock market?
Learn how positive correlation is found in the stock market, how correlation is calculated and how positive correlation is ... Read Answer >> 
What is the difference between positive correlation and inverse correlation?
Learn the difference between a positive correlation and a negative, or inverse, correlation and the way they apply to the ... Read Answer >> 
Does a negative correlation between two stocks mean anything?
Learn what the concept of negative correlation means, understand how it is generally calculated and see how it is used in ... Read Answer >> 
How do I calculate correlation between market indicators and specific stocks?
Discover how to calculate the correlation coefficient between market indicators and stock prices, a critical skill in technical ... Read Answer >>