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What is the Correlation Coefficient?
The correlation coefficient
a concept from
statistics
is a measure of how well trends in the predicted values
follow trends in past actual values. It is a measure of how
well the predicted values from a forecast model "fit" with the
real-life data.
The correlation coefficient is a number between 0 and
1. If there is no relationship between the predicted values and the
actual values
the correlation coefficient is 0 or very low (the predicted
values are no better than random numbers). As the strength of the
relationship between the predicted values and actual values increases
so does
the correlation coefficient. A perfect fit gives a coefficient of
1.0. Thus
the higher the correlation coefficient
the better.
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