Direct, Inverse and Unrelated

Many people can see a direct correlation. This would be where one variable increases and therefore the other variable increases. In soccer, a team with a high differential between goals scored vs goals allowed will most likely have a high winning percentage. There is usually a direct correlation between positive goal differential and winning percentage.

An example of an inverse correlation would be as interest rates go up, the demand for loans goes down.

The mistake that too many people make is to not understand that without enough data, you don’t know if there is a direct, inverse or unrelated correlation.

An example of an unrelated correlation would be if a student passes a test and it is sunny outside. While those two facts might be true, it would be difficult to show any connection between the two facts.

Too often we make assumptions based on incomplete data and as a result end up interpreting data to be connected when it really isn’t.

Just a thought.

have a great day!

Lawrence