Statistics for Business: Decision Making and Analysis, 3rd Edition

• ... only to quantitative variables. Don’t apply correlation to categorical data.

• ✓ Linear. Correlation measures the strength of linear association. A correlation near zero implies no linear association, but there could be a nonlinear pattern.

• ✓ Outliers. Outliers can distort the correlation dramatically. An outlier can enlarge an otherwise small correlation or conceal a large correlation. If you see an outlier, it’s often helpful to report the correlation with and without the point.

Caution

Be cautious if a report gives a correlation without the associated scatterplot. The concerns in this checklist are important even if you don’t see the plot.

4M Analytics 6.1 Locating A New Store

Motivation State the Question

When retailers like Target look for locations ...