Calculating correlation coefficients is a method of determining whether or not two sets of data are related to one another. In addition, correlation coefficients can tell you whether the datasets are positively or negatively (inversely) related. Positive relationships exist when the values in the data change in the same direction, either going down or up at the same time. Inverse relationships exist when values in the datasets go up and down contrary to one another. Both positively and inversely related datasets can be useful forecasting indicators as long as the correlation coefficient between the two datasets is strong. If we know that two datasets are related, then we can potentially use the known values in one dataset to estimate the unknown values in the other dataset.
A typical formula for calculating a correlation...
