Certified Supply Chain Professional (CSCP) Practice Exam

What does a correlation coefficient of -1 indicate?

1. No correlation exists

2. Perfect negative correlation

3. Weak positive correlation

4. Random correlation

The correct answer is: Perfect negative correlation

A correlation coefficient of -1 indicates a perfect negative correlation between two variables. In practical terms, this means that as one variable increases, the other variable decreases in a perfectly consistent manner. The relationship is linear, and the strength of this correlation is at its maximum in the negative direction. For instance, if you were to plot the two variables on a graph, all data points would fall exactly on a straight line with a negative slope. This value of -1 signifies complete inverse relationship: every increase in one variable directly corresponds to a proportional decrease in the other variable. The other potential answers do not accurately represent what a correlation coefficient of -1 signifies. No correlation exists would refer to a correlation coefficient around 0, while weak positive correlation would imply a value between 0 and 1, indicating a direct relationship but not a perfect one. Random correlation would suggest no discernible pattern or predictability in the relationship, which also does not align with the unambiguous nature of a correlation of -1.