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Understanding Correlation Coefficients

This document defines key terms related to correlation analysis: correlation refers to the relationship between two variables; the correlation coefficient is a measure of the strength and direction of this relationship; and scatter plots can show if a linear correlation exists. The document also describes different types of correlation (positive, negative, no correlation, nonlinear) and provides the formula for calculating the correlation coefficient using data sums and samples. An example calculation is shown to illustrate this process.

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Alex Henry
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5 views8 pages

Understanding Correlation Coefficients

This document defines key terms related to correlation analysis: correlation refers to the relationship between two variables; the correlation coefficient is a measure of the strength and direction of this relationship; and scatter plots can show if a linear correlation exists. The document also describes different types of correlation (positive, negative, no correlation, nonlinear) and provides the formula for calculating the correlation coefficient using data sums and samples. An example calculation is shown to illustrate this process.

Uploaded by

Alex Henry
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Case Study Chapter 9

Glossary

- Correlation
A relationship between two variables.
The data can be represented by ordered pairs (x, y)
x is the independent (or explanatory)
variable
y is the dependent (or response) variable
- Correlation coefficient
A measure of the strength and the direction of a
linear relationship between two variables.
The symbol r represents the sample correlation
coefficient

- scatter plot can be used to determine whether a


linear (straight line) correlation exists between two
variables.

Types of Correlation
y

As x increases, y
tends to decrease.
As x increases, y
tends to increase.
x

Negative Linear Correlation


y

Positive Linear Correlation


y

No Correlation

Nonlinear Correlation

Helpful formulas
Formula for r/
Correlation coefficient

n xy x y

n x 2 x

n y 2 y

The Correlation Coefficient chart

The range of the correlation coefficient is 1 to


1.
-1
If r = 1 there is a
perfect negative
correlation

0
If r is close to
0 there is no
linear
correlation

1
If r = 1 there
is a perfect
positive
correlation

Correlation Coefficient represented as a scatter plot


y

r = 0.91

r = 0.88

Strong negative correlation


y

Strong positive correlation


y

r = 0.42

Weak positive correlation

r = 0.07

Nonlinear Correlation

Calculating a Correlation Coefficient

In Words
1.

Find the sum of the x-values.

2.

Find the sum of the y-values. Calculating


a Correlation Coefficient
Multiply each x-value by its
corresponding y-value and find the sum.

3.
4.
5.
6.

Square each x-value and find the


sum.
Square each y-value and find the
sum.
Use these five sums to calculate the
correlation coefficient.

In Symbols
x
y
xy

x2
y2
r

n xy x y
n x 2 x

n y 2 y

Work

x = 23.1

xy

x2

y2

1.6

428.2

685.12

2.56

183,355.24

3.6

828.8

2983.68

12.96

686,909.44

4.9

1214.2

5949.58

24.01

1,474,281.64

1.1

444.6

489.06

1.21

197,669.16

0.9

264.0

237.6

0.81

69,696

2.9

415.3

1204.37

8.41

172,474.09

2.7

571.8

1543.86

7.29

326,955.24

2.3

454.9

1046.27

5.29

206,934.01

1.6
1.5
x = 23.1

358.7
573.5
y = 5554

573.92
860.25
xy = 15,573.71

2.56
2.25
2
x = 67.35

128,665.69
328,902.25
2
y = 3,775,842.76

y = 5554

xy = 15,573.71

x2 = 32.44

n xy x y
n x 2 x

n y 2 y

y2 = 3,775,842.76

10(15,573.71) 23.1 5554


10(67.35) 23.12 10(3,775,842.76) 5554 2
27, 439.7
0.882
139.89 6,911,511.6

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