Question

A marketing firm analyzed the data from a recent campaign and found that the correlation between the advertising spending (in thousands of dollars) and sales (in thousands of units) is 0.85. What does this correlation coefficient indicate?

a) Strong negative correlation
b) Strong positive correlation
c) Weak negative correlation
d) Weak positive correlation

Answer 1

The correlation coefficient of 0.85 signifies a strong positive correlation between advertising spending and sales, indicating that as one increases, so does the other.

Step-by-step explanation:

The correlation coefficient of 0.85 between advertising spending and sales indicates a strong positive correlation. This means that there is a strong linear relationship where an increase in advertising spending is associated with an increase in sales. The number portion of the correlation coefficient, being closer to 1, shows a strong relationship and suggests that changes in one variable are predictable as the other variable changes.

When comparing correlation coefficients, the weakest relationship is indicated by a coefficient closest to 0. Conversely, a correlation coefficient of −.90 indicates a stronger relationship than a coefficient of −.50, regardless of the sign.

It is also important to remember that the sign of the correlation coefficient (positive or negative) indicates the direction of the relationship. A positive correlation implies that both variables move in the same direction, whereas a negative correlation suggests that they move in opposite directions.