Can correlation be too high?
An extremely high correlation may cause problems with the way computers handle numbers. However, algorithms for computing linear regression have improved that much that that is in most cases not a problem.
What does it mean when correlation is high?
Correlation is a term that refers to the strength of a relationship between two variables where a strong, or high, correlation means that two or more variables have a strong relationship with each other while a weak or low correlation means that the variables are hardly related.
Is high correlation bad?
The stronger the correlation, the more difficult it is to change one variable without changing another. It becomes difficult for the model to estimate the relationship between each independent variable and the dependent variable independently because the independent variables tend to change in unison.
Is the correlation index too high for collinearity?
Correlation is neither a necessary nor a sufficient condition for collinearity. Condition indexes over 10 (per Belsley) indicate moderate collinearity, over 30 severe, but it also depends on which variables are involved in the collinearity.
What does it mean when a correlation coefficient is greater than zero?
A linear correlation coefficient that is greater than zero indicates a positive relationship. A value that is less than zero signifies a negative relationship.
What is considered to be a ” strong ” correlation?
If the relationship between taking a certain drug and the reduction in heart attacks is r = 0.3, this might be considered a “weak positive” relationship in other fields, but in medicine it’s significant enough that it would be worth taking the drug to reduce the chances of having a heart attack.
When to act on a correlation, and when not to?
Confidence that the correlation will reliably recur in the future. The higher that confidence level, the more reasonable it is to take action in response. The tradeoff between the risk and reward of acting.