Why do Businesses use it?
Businesses may use correlation for number of reasons. They could use their statistics to anticipate how the market will react to a sudden change in supply and demand. For example, if the price of the average computer falls, there may be a slight or sudden change in consumer spending, however, depending on the market, the change may rise for those who wouldn’t mind a cheaper computer, or on the other hand it could be classes as a luxury good, therefore the price may be important giving the goods an exclusive feel. This may attract the more up market customers more than those who are lower class.
How useful is it to a business and why is it important?
Trends can be seen if the research has been taken over a period of time. Graphs can be developed in order help predict future highs and lows. The reliability of the data source needs to be taken into consideration because a very bias, distorted or even out-dated piece of information could prove a huge problem in determine the accuracy of the trends.
If the data source is as accurate as possible and enough time and effort has been spent in researching into it, it can quite valuable. The data can be interpreted into various ways such as graphs, charts ad evaluation reports. Clever firms will hopefully carry out his research much in advance an in quick succession to stay way ahead of their competitors, in reacting to the customers needs and wants within the current economic climate. Data has a huge tendency to leak outwards due to miss communication and inadequate security therefore it is vital to keep the data close to your firm at all times and possibly release some statistics to other firms outside your industry through a negotiated price, however not to your direct competitors.
Positive/Negative Correlation
A relationship in which the values of two variables increase (Positive) or decrease (Negative) together:
Positive Negative
