Qm
Statistics

Spurious correlation: cumulative ad spend and cumulative revenue

spurious-correlationtrendcumulative-series

A marketing lead plots the company's cumulative ad spend against its cumulative revenue, month by month. Both rise every single month, and the two curves correlate at r=0.99r = 0.99. She presents this as proof that advertising drives revenue.

Why is the 0.99 essentially guaranteed, and how should she analyze the data instead?

Your answer

Solving needs a free account

Answers, streaks and solutions unlock when you are signed in. Reading the question and the hint stays free.

Create a free accountSign in

Discussion

Sign in to join the discussion · reading is open to everyone

💡 Discussion rules

  1. No full solutions here. Hints and approaches only.
  2. Complexity, edge cases and intuition are the point.
  3. Interview experiences are welcome. Respect your NDAs.

Loading discussion…

Learn the concepts

The theory behind this question.

A Benchmarking Harness for New SignalsA Practical Tuning Order for Gradient BoostingA/B TestingThe Abdi-Ranaldo Spread EstimatorDesigning an Ablation Study

Related questions

Spurious correlation: quant-fund count and an altcoin's priceSpurious correlation: tea imports and life expectancySpurious correlation: two drifting stock pricesSpurious correlation: strategy equity curve and the index levelWhy you run an A/B test for whole weeks, not "until it's ready"
All questions →