Interpretation of Scatter Diagram

After observing the pattern of dots, one can know the presence or absence of correlation and its type. Besides, it also gives an idea of the nature and intensity of the relationship between the two variables. 

The scatter diagram can be interpreted in the following ways:

1. Perfect Positive Correlation

If the points of the scatter diagram fall on a straight line and have a positive(upward) slope, then the correlation is said to be perfectly positive; i.e., r = +1.

2. Perfect Negative Correlation

If the points of the scatter diagram fall on a straight line and have a negative(downward) slope, then the correlation is said to be perfectly negative; i.e., r = -1.

3. Positive Correlation

When the points of the scatter diagram cluster around a straight line (upward slope from left to right), then the correlation is said to be positive.

4. Negative Correlation

When the points of the scatter diagram cluster around a straight line (downward/negative slope), then the correlation is said to be negative.

5. No Correlation

When the points of the scatter diagram are scattered in a haphazard manner, then there is zero or no correlation. 

How to interpret a Scatter Diagram?

While interpreting a scatter diagram, the given below points should be taken into consideration:

• Dense or Scattered Points: If the plotted points are close to each other, then the analyst can expect a high degree of correlation between the two variables. However, if the plotted points are widely scattered, then the analyst can expect a poor correlation between the variables.
• Trend or No Trend: If the points plotted on the scatter diagram shows any trend either upward or downward, then it can be said that the variables are correlated. However, if the plotted points do not show any trend, then it can be said that the variables are uncorrelated.
• Upward or Downward Trend: If the plotted points show an upward trend rising from the lower left-hand corner of the graph and goes upward to the upper right-hand corner, then the correlation is positive. It means that the two variables move in the same direction. However, if the plotted points show a downward trend from the upper left-hand corner of the graph to the lower right-hand corner, then the correlation is negative. It means that the two variables move in the opposite direction.
• Perfect Correlation: If the points plotted on the scatter diagram lie on a straight line and have a positive slope, then it can be said that the correlation is perfect and positive. However, if the points plotted lie on a straight line and have a negative slope, then it can be said that the correlation is perfect and negative.