Correlation

If a change in one situation A is usually observed before or after a change in B, then A is said to correlate with B. If B follows A, then the occurrence A leads to the forecast of B. Futurists would say that A is a leading indicator of B. Marvin Cetron, President of Forecasting International, uses the ratio of the number of people in the bottom 10 percent of income in a country compared with the top 10 percent of income to forecast the likelihood of political stability. Four years before the fall of the Shah, Iran's ratio was 38 to 1. At the same time, it was 10 to 1 in the United States, while 2.5 to 1 in Scandinavia. Graham Molitor, President of Public Policy Forecasting, uses socio-political policy change in Sweden to forecast future change in the United States. The Conference Board’s Leading Economic Indicators are used to forecast economic activity six months into the future. The identification of leading indicators is a normal practice of any business and should be included in any long-term prospective study. Correlations can be misleading: although A may appear to correlate with B, the both could be caused by an unknown factor C. If C changes then the correlation of A and B may no longer be predictive. Indicates the strength and direction of a linear relationship between two random variables.