Definition of "Correlation"

Degree of relationship between variables or factors affecting the real estate market and activities within the market. Correlation examines how the value of one variable changes when the value of another variable changes (e.g., interest rates, money supply). A prediction can be made based on the relationship. A degree of correlation is measured mathematically by the coefficient of determination (r-squared). The correlation between variables may range between +1 to - 1. Perfect positive correlations +1. perfect negative correlation is -1. No correlation between variables is indicated by 0.

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