Interpreting correlation in excel

Correlation basically means a mutual connection between two or more sets of data. In statistics, bivariate data or two random variables are used to find the correlation between them.

Correlation coefficient is generally the measurement of correlation between the bivariate data which basically denotes how much two random variables are correlated with each other.

If the correlation coefficient is 0, the bivariate data are not correlated with each other.

If the correlation coefficient is -1 or +1, the bivariate data are strongly correlated with each other.

r=-1 denotes strong negative relationship and r=1 denotes strong positive relationship.

In general, if the correlation coefficient is close to -1 or +1 then we can say that the bivariate data are strongly correlated to each other.

The correlation coefficient is calculated using Pearson’s Correlation Coefficient which is given by :

where,

r: Correlation coefficient
: Values of the variable x.
: Values of the variable y.
n: Number of samples taken in the data set.

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