Positive Correlation

AAA

DEFINITION of 'Positive Correlation '

A relationship between two variables in which both variables move in tandem. A positive correlation exists when as one variable decreases, the other variable also decreases and vice versa. In statistics, a perfect positive correlation is represented by the value +1.00, while a 0.00 indicates no correlation and a -1.00 indicates a perfect negative correlation.

INVESTOPEDIA EXPLAINS 'Positive Correlation '

Here are a few simple examples of a positive correlation: The more money I save, the more financially secure I feel. The longer I invest, the more compound interest I earn. The less time I spend marketing my business, the fewer new clients I acquire. The more years of education I complete, the higher my earning potential.

A perfect positive correlation means that 100% of the time, the relationship that appears to exist between two variables is positive. It is also possible for two variables to be positively correlated in some, but not all, cases.

VIDEO

Loading the player...
RELATED TERMS
  1. Inverse Correlation

    A contrary relationship between two variables such that they ...
  2. Negative Correlation

    A relationship between two variables in which one variable increases ...
  3. Cross-Correlation

    A statistical measure timing the movements and proximity of alignment ...
  4. Covariance

    A measure of the degree to which returns on two risky assets ...
  5. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  6. Correlation

    In the world of finance, a statistical measure of how two securities ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
Related Articles
  1. Investing

    Correlation

    In the world of finance, correlation is a statistical measure of how two securities move in relation to each other.
  2. Forex Education

    Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.
  3. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.
  4. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...
  5. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  6. Investing Basics

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
  7. Technical Indicators

    The Normal Distribution Table, Explained

    The normal distribution formula is based on two simple parameters - mean and standard deviation
  8. Economics

    Can Investors Trust Official Statistics?

    The official statistics in some countries need to be taken with a grain of salt. Find out why you should be skeptical.
  9. Investing Basics

    R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.
  10. Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept & Examples

    When you're indecisive about an investment, the best way to keep a cool head might be test various hypotheses using the most relevant statistics.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center