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Correlation

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					                                        POSITIVE DIRECTION OF CORRELATION

                                     Sales                 Days        Op.      Gross                      #                   Total
                          Profit     p.s.f.    Turns       Open      Costs     Margin     Labour      Trans.      Area         Sales   Rent

        Sales p.s.f.
             Turns
        Days Open
  Operating Costs
     Gross Margin

            Labour

    # Transactions

              Area
        Total Sales

              Rent
 Mystery Shopper



                                       NEGATIVE DIRECTION OF CORRELATION
                                     Sales                 Days       Op.       Gross                     #                    Total
                          Profit     p.s.f.    Turns       Open      Costs     Margin     Labour      Trans.      Area         Sales   Rent

        Sales p.s.f.

             Turns

        Days Open
  Operating Costs
     Gross Margin
            Labour

    # Transactions
              Area
        Total Sales
              Rent
 Mystery Shopper

                       Correlation Coefficients
                                 High        0.66 and Over
                                 Medium 0.50 - 0.65
                                 Low         0.33 - 0.49
                                 Under 0.33

A correlation coefficient represents the degree to which one phenomenon is linked to another. A positive correlation
is one that falls between zero and +1 (with +1 being an absolutely reliable linear relationship). A negative correlation
(shown above by hatch-marks) is one that falls between zero and -1. Any correlation over 0.5 is "good" and any over
0.66 is "very good". If variables are highly correlated, the value of one of them places a narrow range of possibilities for
the value of the other. High correlations include:
- Profit with sales per square foot; and
- Total sales with turns and number of transactions.
Source: John Winter Associates Limited.

				
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posted:12/18/2011
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