Correlation Coefficient


Health Economics

  • A linear measure of how closely two variables are related. Generally denoted by r, its absolute value provides an indication of the strength of the relationship. The value of r varies between +1 and '1, with '1 or +1 indicating a perfect linear relationship, and r = 0 indicating no relationship. The sign of the correlation coefficient indicates whether the slope of the line is negative or positive when the two variables are plotted in a scatter diagram. It is also known as Pearson's correlation coefficient after the British statistician Karl Pearson (1857-1936). Correlation does not imply causation. For example, there is evidence that the density of the stork population is correlated with the human birth rate. The reason for the relationship is probably that both variables are related to the number of chimney stacks, which are favourite nesting sites for the birds and also an indicator of the size of the human population.