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Explanation to "Correlation" question

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1. Does correlation equal causation? Does the strength of correlation depend on the direction? What is the meaning of a zero correlation? Explain your answers.

2. What is the difference between an independent and a dependent variable? Does a regression model imply causation? Why or why not?

3. How can you use correlation in your life or in your job?

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Solution Summary

This solution discusses the following statistical concepts: correlation, causation, independent variables, and dependent variables.

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No, correlation not always indicates causation. Two variables might be correlated without one causing the other. Suppose that the number of oranges produced in a county in one particular harvest season is regressed against the wheat production in that county in the harvest season. While numbers can be regressed against each other, the production of oranges does not cause the production of wheat or vice versa. So in this case while regression is possible, causation does not exist.

The strength of correlation does not depend on direction. Two variables with a correlation coefficient of -0.9873 are as strongly correlated as two variables with a correlation coefficient of 0.9873. The negative sign simply means that the two variables move in opposite directions. They might move equally ...

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