Auto-formatting is not a kind of correction. Yet, if I want to change auto-formatting settings, I have to look for them under Tools | AutoCorrect | AutoCorrect options... This is counter-intuitive and should change. Either the naming should change; or there should be some kind of duplicate way to get to the same settings, named differently; or the settings should be separated.
You mean Apply Styles vs. INitials, for example? Rather philosophical question if this formatting or correction. Not just bike-shedding but even counter-productive since you have to look for options in two dialogs.
We discussed the topic in the design meeting. The term AutoCorrect uses camel case and might be not clear for some users. However, alternatives such as "Text Refinement" would not be familiar and detrimental to usability. We decided to keep the term therefore.