Module III: Data Analyses Techniques

Descriptive statistics, Review of hypothesis testing procedures: Parametric tests (z-test, t-test, and F-test) and
Non-parametric test (Chi-square test, One-way and two-way ANOVA) Associative and Predictive analysis:
Correlation and Regression- bivariate and multivariate Multivariate Techniques: Multi-Dimensional scaling,
Data reduction (Factor analysis) and cluster analysis Data Analysis: Introduction to statistical software SPSS
21.0

Descriptive statistics
Descriptive statistics is a branch of statistics focused on summarizing, organizing, and presenting data in a
clear and understandable way. Descriptive statistics is primarily concerned with measures of central
tendency, variability, and distribution, as well as graphical representations of data.
Types of descriptive statistics
There are three types of descriptive statistics:
1. Measures of Central Tendency
2. Measures of Dispersion
3. Measures of Frequency Distribution

1. Measures of central tendency

Measures of central tendency estimate the center, or average, of a data set. The mean, median and mode are
3 ways of finding the average.
• Mean
Mean is the sum of all the components in a group or collection divided by the number of items in that group
or collection. Mean of a data collection is typically represented as x̄ (pronounced “x bar”). The formula for
calculating the mean for ungrouped data to express it as the measure is given as follows:
Example: Weights of 7 girls in kg are 54, 32, 45, 61, 20, 66 and 50. Determine the mean weight for the
provided collection of data.
Mean = Σx/n
= (54 + 32 + 45 + 61 + 20 + 66 + 50)/7
= 328 / 7
= 46.85
Thus, the group’s mean weight is 46.85 kg.
• Median
Median of a data set is the value of the middle-most observation obtained after organizing the data in
ascending order. Then, the median is the number in the middle. If there are two numbers in the middle, find
their mean.

Median number of library visits

Ordered data set 0, 3, 3, 12, 15, 24
Middle numbers 3, 12
Median Find the mean of the two middle numbers: (3 + 12)/2 = 7.5
• Mode
Mode is one of the measures of central tendency, defined as the value that appears the most frequently in the
provided data, i.e. the observation with the highest frequency is known as the mode of data.
Example: Weights of 7 girls in kg are 54, 32, 45, 61, 20, 45 and 50. Determine the mode weight for the
provided collection of data.
Mode = Most repeated observation in Dataset
= 45
Thus, group’s mode weight is 45 kg.
2. Measures of Variability (or Dispersion)
These measures describe the spread or variability of the data points in the dataset. There are four main types:
• Range: The difference between the largest and smallest values in the dataset.
Ordered data set: 0, 3, 3, 12, 15, 24
Range: 24 – 0 = 24

• Variance: The variance is the average of squared deviations from the mean. Variance reflects the degree
of spread in the data set. The more spread the data, the larger the variance is in relation to the mean.

To find the variance, simply square the standard deviation. The symbol for variance is s2.

Example: Calculate the variance of the following data series:

Data set: 15, 3, 12, 0, 24, 3
First we have to calculate the standard deviation, that we calculate above
s = 9.18
s2 = 84.3

• Standard Deviation: It represents the average deviation of each score from the mean.
There are six steps for finding the standard deviation:
1. List each score and find their mean.
2. Subtract the mean from each score to get the deviation from the mean.
3. Square each of these deviations.
4. Add up all of the squared deviations.
5. Divide the sum of the squared deviations by N – 1.
6. Find the square root of the number you found.
Example: Calculate standard deviation of the following data series:

Raw data Deviation from mean Squared deviation

15 15 – 9.5 = 5.5 30.25
3 3 – 9.5 = -6.5 42.25
12 12 – 9.5 = 2.5 6.25
 0 0 – 9.5 = -9.5 90.25
24 24 – 9.5 = 14.5 210.25
3 3 – 9.5 = -6.5 42.25
M = 9.5 Sum = 0 Sum of squares = 421.5
Step 5: 421.5/5 = 84.3
Step 6: √84.3 = 9.18
From learning that s = 9.18, you can say that on average, each score deviates from the mean by 9.18 points.

3. Frequency distribution
A data set is made up of a distribution of values, or scores. In tables or graphs, you can summarize the
frequency of every possible value of a variable in numbers or percentages. This is called a frequency
distribution.

What is Hypothesis Testing?

Hypothesis testing is basically an assumption that we make about a population parameter. It is used to make
an educated guess about an assumption using statistics. With the use of sample data, hypothesis testing
makes an assumption about how true the assumption is for the entire population from where the sample is
being taken. There are 5 main steps in hypothesis testing:

• State your research hypothesis as a null hypothesis and alternate hypothesis (Ho) and (Ha or H1).
• Collect data in a way designed to test the hypothesis.
• Perform an appropriate statistical test.
• Decide whether to reject or fail to reject your null hypothesis.
• Present the findings in your results and discussion section.

NULL HYPOTHESIS

The Null hypothesis (denoted as H0) states that there is no difference between the population parameter and
the sample statistic being compared. The null hypothesis in statistics states that there is no difference
between groups or no relationship between variables. Null Hypothesis is the hypothesis that is always tested
for acceptance or rejection. If we are to compare method A with method B about its superiority and if we
proceed on the assumption that both methods are equally good, then this assumption is termed as the null
hypothesis (H0).

Suppose we want to test the hypothesis that the population mean () is equal to the hypothesized mean (H0)
= 100.
Then we would say that the null hypothesis is that the population mean is equal to the hypothesized mean
100 and symbolically we can express as:
H0 :  = H0 = 100

ALTERNATIVE HYPOTHESIS

The Alternative hypothesis (denoted as H1) states that there is a difference between the population parameter
and sample statistic. If we accept H0, then we are rejecting H1 and if we reject H0, then we are accepting H1.
Example: We may think that the method A is superior or the method B is inferior, then we are stating
alternative hypothesis (Ha).
For H0:  = H0 = 100, we may consider three possible alternative hypotheses as follows

Alternative hypothesis To be read as follows

Ha :   H (The alternative hypothesis is that the population mean is not equal to 100
0 i.e., it may be more or less than 100)
Ha :   H (The alternative hypothesis is that the population mean is greater than 100)
0
Ha :   H (The alternative hypothesis is that the population mean is less than 100)
0

Key Terms of Hypothesis Testing

• Level of significance: It refers to the degree of significance in which we accept or reject the null
hypothesis. 100% accuracy is not possible for accepting a hypothesis, so we, therefore, select a level of
significance that is usually 5%. This is normally denoted with  (alpha) and generally, it is 0.05 or 5%,
which means your output should be 95% confident to give a similar kind of result in each sample.

• CONFIDENCE LEVEL
The confidence level is the probability of accepting the null hypothesis when it (H0) happens to be true.
In other words, confidence level is the expected percentage of times that the actual value will fall within
the stated precision limits. Thus, if we take a confidence level of 95%, then we mean that there are 95
chances in 100 (or 0.95 in 1) that the sample results represent the true condition of the population within
a specified precision range against 5 chances in 100 (or 0.05 in 1) that it does not.
Confidence level indicates the likelihood that the answer will fall within that range, and the significance
level indicates the likelihood that the answer will fall outside that range. We can always remember that
If the confidence level is 95% (0.95), then the significance level will be (100 – 95) i.e., 5% (0.05).
If the confidence level is 99% (0.99), the significance level is (100 – 99) i.e., 1% (0.01).
If the confidence level is 90% (0.90), the significance level is (100 – 90) i.e., 10% (0.10).
It may also be denoted as acceptance region.

• TYPE I AND TYPE II ERRORS

In the context of testing of hypotheses, there are basically two types of errors we can make. We may
reject H0 when H0 is true and we may accept H0 when in fact H0 is not true. The former is known as Type
I error and the latter as Type II error. In other words, Type I error means rejection of hypothesis which
should have been accepted and Type II error means accepting the hypothesis which should have been
rejected. Type I error is denoted by  (alpha) known as  error, also called the level of significance of
test; and Type II error is denoted by  (beta) known as  error. In a tabular form the said two errors can
be presented as follows:
Accept H0 Reject H0
Correct Decision with confidence Type I Error
H0 is true
level (1-) ( error)
Type II Error Correct Decision, Power of Test
H0 is false
( error) (1-)

Though efforts are made to reduce both Type I and Type II Errors, but it is not possible to reduce both at
the same time. Generally,  and  are inversely related to each other that if we reduce the probability of
Type I error () from 0.05 to 0.01, we simultaneously increase the probability of committing Type II
Error (). The value of  can be reduced only by increasing the value of .
However in general it is more risky to accept a false hypothesis (or commit Type II Error) than to reject a
true hypothesis (or commit a Type I error). The probability of committing a Type I error (rejecting a true
 hypothesis) is kept at 5 per cent level or the probability of rejecting a correct hypothesis is generally
fixed at 0.05. In other words the critical region is 5 per cent and acceptance region is 95 per cent.

PROCEDURE FOR TESTING OF HYPOTHESIS

1) Set up a statistical hypothesis→ The first thing in hypothesis testing is to set up a hypothesis about a
population parameter. The conventional approach to hypothesis testing is to set up two hypotheses
instead of one in such a way that if one hypothesis is true, the other is false. Alternatively, if one
hypothesis is false or rejected, then the other is true or accepted. These two hypotheses are:
i) Null hypothesis, and
ii) Alternative hypothesis

2) Select an appropriate test→ To test the null hypothesis, it is necessary to select an appropriate
statistical test. It is used to test whether the null hypothesis set-up should be accepted or rejected. Some
probability distributions that are commonly used in testing procedures are t, z, and 2. Test criteria must
employ an appropriate probability distribution. If the sample size is less than 30 (n < 30) then t-test
should be used, but when n  30, then z test should be used.

3) Set the suitable significance level→ The next step is to test its validity at a certain level of significance
(). The confidence with which a null hypothesis is rejected or accepted depends upon the significance
level use for the purpose. The significance level is also known as the size of the rejection region or the
size of the critical region. Generally, in practice, either 5% (0.05) level or 1% (0.01) level is adopted for
the purpose. The factors that affect the level of significance are:
a) The extent of the difference between sample means;
b) The size of the samples;
c) The variability of measurements within samples; and
d) Whether the hypothesis is directional or non-directional.

4) Calculation and Critical Value→ The next step is to calculate the appropriate value from the sample
data concerning the test statistic, necessary for the application of that particular test. Also get the
tabulated value of confidence level.

5) Making decision→ lastly, a decision should be arrived as to whether the null hypothesis is to be
accepted or rejected. In this regard the value of the test statistic calculated to test the hypothesis plays a
very important role. If the calculated value of the test statistic is less than the critical value, the computed
value of the test statistic falls in the acceptance region and the null hypothesis is accepted. If the
calculated value of the test statistic is greater than the critical value, the calculated value of the test
statistic falls in the rejection region and null hypothesis is rejected. Usually 5% level of significance  =
0.05 is used in testing a hypothesis and taking a decision unless otherwise any other level of significance
is specifically stated.

PARAMETRIC TESTS (Z-TEST, T-TEST, AND F-TEST)

Parametric tests are statistical measures used in the analysis phase of research to draw inferences and
conclusions to solve a research problem. There are various types of parametric tests, such as z-test, t-test
and F-test. The selection of a particular test for research depends upon various factors, such as the type of
population, sample size, Standard Deviation (SD) and variance of population. It is important for a
researcher to identify the appropriate test to maintain the authenticity and validity of research results.

What is the t-Test?

T-tests are a statistical way of testing a hypothesis when:

• Our sample size is small, n < 30

• Population distribution is normal, and
• Samples are random and independent
• Population standard deviation is not known.

There are 3 types of t-tests that could be performed on the n number of samples collected.

• One-sample test,
• Independent sample t-test and
• Paired samples t-test

We perform a One-Sample t-test when we want to compare a sample mean with the population mean. We
use the sample standard deviation instead of population standard deviation in this case.
Independent Sample T-Test

Students t-test is used to compare the mean of two groups of samples. It helps evaluate if the means of the
two sets of data are statistically significantly different from each other.

Where,
t = Student's t-test
x1 = mean of first group
x2= mean of second group
s1 = standard deviation of group 1
s2 = standard deviation of group 1
n1= number of observations in group 1
n2= number of observations in group 2

Click on link for Examples- t-test formula - Derivation, Examples ([Link])

Paired Samples T-Test
Whenever two distributions of the variables are highly correlated, they could be pre and post test results
from the same people. In such cases, we use the paired samples t-test.

where
t = Student's t-test
x1−x2= Difference mean of the pairs
s= standard deviation
n = sample size

What is Z-Test?

Z-test is a statistical test that is used to determine whether the mean of a sample is significantly different
from a known population mean when the population standard deviation is known. It is particularly useful
when the sample size is large (>30).

When to Use Z-test:

• The sample size should be greater than 30. Otherwise, we should use the t-test.
• Samples should be drawn at random from the population.
• The standard deviation of the population should be known.
• Samples that are drawn from the population should be independent of each other.
• The data should be normally distributed.

Example One-Tailed Test:

A school claimed that the students who study that are more intelligent than the average school. On
calculating the IQ scores of 50 students, the average turns out to be 110. The mean of the population IQ is
100 and the standard deviation is 15. State whether the claim of the principal is right or not at a 5%
significance level.

First, we define the null hypothesis and the alternate hypothesis.

Our null hypothesis will be: H0 :  =100
and our alternate hypothesis: H1 :  100

Here, our level of significance is given in this question ( =0.05), if not given then we take ∝=0.05 in
general.
Now, we compute the Z-Score:

X = 110
Mean = 100
Standard Deviation = 15
Number of samples = 50

Now, we look up to the z-table. For the value of ∝=0.05, the z-score for the right-tailed test is 1.645.
Here 4.71 >1.645, so we reject the null hypothesis.
If the z-test statistics are less than the z-score, then we will not reject the null hypothesis.

What is F-Test?
The F test is a statistical technique that determines if the variances of two samples or populations are equal
using the F test statistic. Both the samples and the populations need to be independent and fit into an F-
distribution. The null hypothesis can be rejected if the results of the F test during the hypothesis test are
statistically significant; if not, it stays unchanged.

We can use this test when:

• The population is normally distributed.

• The samples are taken at random and are independent samples.

Formula for F-Test to Compare Two Variances:

Here,
Fcalc = Critical F-value.
σ12 & σ22 = variance of the two samples.

Here,
df = Degrees of freedom of the sample.
nS = Sample size.
df=ns-1

For Numerical Click link F Test Formula: Definition, Formula, Solved Examples ([Link])

NON-PARAMETRIC TEST (CHI-SQUARE TEST, ONE-WAY AND TWO-WAY ANOVA)

Non-parametric tests are the mathematical methods used in statistical hypothesis testing, which do not make
assumptions about the frequency distribution of variables that are to be evaluated. The non-parametric
experiment is used when there are skewed data, and it comprises techniques that do not depend on data
pertaining to any particular distribution.
Chi-Square (Χ²)
A Pearson’s chi-square test is a statistical test for categorical data. It is used to determine whether your data
are significantly different from what you expected. It can also be used to make comparisons between
theoretical populations and actual data when categories are used. There are two types of Pearson’s chi-
square tests:

• The chi-square goodness of fit test is used to test whether the frequency distribution of a categorical
variable is different from your expectations. When some theoretical distribution is fitted to the given
data, we are always interested in knowing as to how well this distribution fits with the observed data.
If the calculated value of χ2 is less than the table value at a certain level of significance, the fit is
considered to be a good one which means that the divergence between the observed and expected
frequencies is attributable to fluctuations of sampling. But if the calculated value of χ2 is greater than
its table value, the fit is not considered to be a good one.
• The chi-square test of independence is used to test whether two categorical variables are related to
each other.

Chi-square is often written as Χ2 and is pronounced “kai-square”. It is also called chi-squared.

The chi-square formula

Both of Pearson’s chi-square tests use the same formula to calculate the test statistic, chi-square (Χ2):

Where:

• Χ2 is the chi-square test statistic

• Σ is the summation operator (it means “take the sum of”)
• O is the observed frequency
• E is the expected frequency

The larger the difference between the observations and the expectations (O − E in the equation), the bigger
the chi-square will be. To decide whether the difference is big enough to be statistically significant, you
compare the chi-square value to a critical value. If the calculated value of χ2 is equal to or exceeds the table
value, the difference between the observed and expected frequencies is taken as significant, but if the table
value is more than the calculated value of χ2, then the difference is considered as insignificant.
A shopkeeper wants to know if the type of product sold is independent of the time of the day. He
collects the following data:

Product Type / Time Morning Afternoon Evening Total

Electronics 25 30 45 100
Clothing 40 50 60 150
Total 65 80 105 400

The shopkeeper wants to test whether the type of product sold is independent of the time of the day at a 5%
significance level (α = 0.05).
One-way and two-way ANOVA

ANOVA (Analysis of Variance) is a statistical method used to compare the averages (means) of three or
more groups to see if they are significantly different from each other.

Imagine you have three different types of fertilizers, and you want to find out which one helps plants grow
the tallest. You plant seeds using each fertilizer and measure the plant heights after some time.
• If the average heights of the plants are very different, you might think that the fertilizers have
different effects.
 • But sometimes, differences happen just by chance. ANOVA helps you check if the differences are
real (statistically significant) or just due to random variation.

Key Points:
• More than two groups: If you have only two groups, a simple t-test would work. ANOVA is needed
when you have three or more groups.
• Finds overall difference: ANOVA tells you if there is a difference somewhere, but it does not tell
you which groups are different. You may need further tests for that.
• Uses Variance: It looks at how much variation exists within each group and between groups. If the
variation between groups is much larger than within groups, the difference is likely significant.

Assumptions for ANOVA

1. Each of the samples is drawn from a normal population and
2. Each of these populations has the same variance.
3. Each one of the sample is independent of the other samples.
4. Sample have been selected randomly from the population.

One-Way ANOVA vs. Two-Way ANOVA

1. One-Way ANOVA (Single Factor ANOVA)

• Used when comparing one factor (independent variable) with multiple groups.
• Example: You test three different fertilizers to see their effect on plant growth (one factor =
fertilizer type).
• Question it answers: "Is there a significant difference in plant height due to the type of fertilizer?"

2. Two-Way ANOVA (Two-Factor ANOVA)

• Used when comparing two factors (independent variables) at the same time.
• Example: You test three fertilizers and also consider different soil types (two factors = fertilizer &
soil type).
• It answers two questions:
1. Does fertilizer type affect plant height?
2. Does soil type affect plant height?
3. Does the combination of fertilizer and soil type have an effect? (interaction effect)

Here’s an example of when we might use a one-way ANOVA:

You randomly split up a class of 90 students into three groups of 30. Each group uses a different studying
technique for one month to prepare for an exam. At the end of the month, all of the students take the same
exam.
You want to know whether or not the studying technique has an impact on exam scores so you conduct
a one-way ANOVA to determine if there is a statistically significant difference between the mean scores of
the three groups.
Associative and Predictive analysis: Correlation and Regression- bivariate and multivariate

Associative Analysis shows the relationships or associations between variables in a dataset. Example:
Given transaction data from a supermarket, associative analysis can identify which items are frequently
purchased together. For instance, it might reveal that customers who buy bread are likely to buy butter as
well.

Predictive Analysis involves using historical data to make predictions about future outcomes. Example:
Predictive analysis can be applied to various scenarios. For instance:

• Predicting stock prices based on historical stock market data.

• Forecasting demand for a product based on sales data.

Correlation is the relationship or association between two variables. There are multiple ways to measure
correlation, but the most common is Pearson's correlation coefficient (r), which tells you the strength of the
linear relationship between two variables. The value of r has a range of -1 to 1 (0 indicates no relationship).
Values of r closer to -1 or 1 indicate a stronger relationship and values closer to 0 indicate a weaker
relationship.

Regression is a statistical method for estimating the relationship between two or more variables. In theory,
regression can be used to predict the value of one variable (the dependent variable) from the value of one or
more other variables (the independent variable/s or predictor/s). There are many different types of
regression, depending on the number of variables and the properties of the data that one is working with, and
each makes assumptions about the relationship between the variables.

Bivariate analysis
Bivariate analysis is slightly more analytical than Univariate analysis. When the data set contains two
variables and researchers aim to undertake comparisons between the two data set then Bivariate analysis is
the right type of analysis technique.
Here is one simple example of bivariate analysis –
In a survey of a classroom, the researcher may be looking to analysis the ratio of students who scored above
85% corresponding to their genders. In this case, there are two variables – gender = X (independent variable)
and result = Y (dependent variable). A Bivariate analysis is will measure the correlations between the two
variables.
Bivariate analysis is conducted using –
•Correlation coefficients
•Regression analysis

Multivariate analysis
Multivariate analysis is a more complex form of statistical analysis technique and used when there are more
than two variables in the data set.
Here is an example of multivariate analysis –
A doctor has collected data on cholesterol, blood pressure, and weight. She also collected data on the eating
habits of the subjects (e.g., how many ounces of red meat, fish, dairy products, and chocolate consumed per
week). She wants to investigate the relationship between the three measures of health and eating habits?
In this instance, a multivariate analysis would be required to understand the relationship of each variable
with each other.
Commonly used multivariate analysis technique include –
•Factor Analysis
•Cluster Analysis
•Variance Analysis
•Discriminant Analysis
•Multidimensional Scaling
•Principal Component Analysis
Redundancy Analysis

MULTI-DIMENSIONAL SCALING

Multidimensional Scaling (MDS) is a dimension-reduction technique designed to project high dimensional

data down to 2 dimensions while preserving relative distances between observations. It can be used to look
at higher dimensional data and try to find patterns or groupings.
Multidimensional scaling (MDS) is a technique for visualizing distances between objects, where the distance
is known between pairs of the objects.

example

To illustrate the basic mechanics of MDS it is useful to start with a very simple example. The distance
matrix below shows the distance, in kilometers, between four Australian cities. From these distances alone,
we can reconstruct the map (shown below) which shows the distance between the cities.

Features of the Multidimensional Scaling (MDS)

• MDS is based on the concept of distance and aims to find a projection of the data that minimizes the
differences between the distances in the original space and the distances in the lower-dimensional
space. This allows MDS to preserve the relationships between the data points, and to highlight
patterns and trends that may not be apparent in the original space.

• MDS can be applied to a wide range of data types, including numerical, categorical, and mixed data.
This makes MDS a versatile tool that can be used with many different kinds of data and allows it to
handle complex multi-modal data sets.
 • MDS is widely used in many fields, including machine learning, data mining, and pattern
recognition. This makes it a well-established and widely-supported technique that has been
extensively tested and validated, and that has a large and active user community.

Limitations of Multidimensional Scaling (MDS)

• It relies on the distances between the data points to define the projection and does not consider other
types of relationships between the data points, such as correlations or associations. This means that
MDS may not be suitable for data sets that have complex, non-distance-based relationships, or that
have missing or noisy distances.

• It is sensitive to outliers and noise in the data, which can affect the quality of the projection and the
interpretability of the results. MDS may produce projections that are distorted or misleading if the
data contains outliers or noise, and may not accurately reflect the underlying structure of the data.

DATA REDUCTION (FACTOR ANALYSIS)

Factor analysis is a technique that is used to reduce a large number of variables into fewer numbers of
factors. This technique extracts maximum common variance from all variables and puts them into a
common score. As an index of all variables, we can use this score for further analysis. Factor analysis is
part of general linear model (GLM) and this method also assumes several assumptions: there is linear
relationship, there is no multicollinearity, it includes relevant variables into analysis, and there is true
correlation between variables and factors. Several methods are available, but principal component analysis
is used most commonly.

Features of factor analysis

While studying customer satisfaction related to a product, a researcher will usually pose several questions
about the product through a survey. These questions will consist of variables regarding the product’s
features, ease of purchase, usability, pricing, visual appeal, and so forth. These are typically quantified on a
numeric scale. But, what a researcher looks for is the underlying dimensions or “factors” regarding customer
satisfaction. These are mostly psychological or emotional factors toward the product that cannot be directly
measured. Factor analysis uses the variables from the survey to determine them indirectly.
When a researcher assumes these variables from the survey, they are condensed into one or more factors.
Some of the methods used to extract these factors could include:

• Principal component analysis

This is the most commonly used method. The first factor is extracted by determining the maximum variance.
This variance is then removed and is replaced by the factor. The second factor is then determined by the next
highest variance, and the process continues until there are no more variances.

• Common factor analysis

In this method, the factors are extracted from commonly-occurring variances and do not include the unique
variances of all the variables.

Types of factor analysis

There are essentially two types of factor analysis:
• Exploratory Factor Analysis: In exploratory factor analysis, the researcher does not make any
assumptions about prior relationships between factors. In this method, any variable can be related to
any factor. This helps identify complex relationships among variables and group them based on
common factors.
• Confirmatory Factor Analysis: The confirmatory factor analysis, on the other hand, assumes that
variables are related to specific factors and uses pre-established theory to confirm its expectations of
the model.

How to do Factor Analysis (Factor Analysis Steps)

1. Determine the Suitability of Data for Factor Analysis

2. Choose the Extraction Method
3. Factor Extraction
4. Determine the Number of Factors to Retain
5. Factor Rotation
6. Interpret and Label the Factors
7. Compute Factor Scores (if needed)
8. Report and Validate the Results

CLUSTER ANALYSIS
Cluster analysis, also known as clustering, is a method of data mining that groups similar data points
together. The goal of cluster analysis is to divide a dataset into groups (or clusters) such that the data points
within each group are more similar to each other than to data points in other groups. Cluster Analysis is the
process to find similar groups of objects in order to form clusters

For example, consider a dataset of vehicles given in which it contains information about different vehicles
like cars, buses, bicycles, etc. As it is unsupervised learning there are no class labels like Cars, Bikes, etc for
all the vehicles, all the data is combined and is not in a structured manner. Now our task is to convert the
unlabelled data to labelled data and it can be done using clusters.
The main idea of cluster analysis is that it would arrange all the data points by forming clusters like cars
cluster which contains all the cars, bikes clusters which contains all the bikes, etc.

Clustering Methods:

• Partitioning Method
• Hierarchical Method
• Density-based Method
• Grid-Based Method
 • Model-Based Method
• Constraint-based Method

Applications Of Cluster Analysis:

• It is widely used in image processing, data analysis, and pattern recognition.
• It helps marketers to find the distinct groups in their customer base and they can characterize their
customer groups by using purchasing patterns.
• It can be used in the field of biology, by deriving animal and plant taxonomies and identifying genes
with the same capabilities.
• It also helps in information discovery by classifying documents on the web.

Advantages of Cluster Analysis:

• It can help identify patterns and relationships within a dataset that may not be immediately obvious.
• It can be used for exploratory data analysis and can help with feature selection.
• It can be used to reduce the dimensionality of the data.
• It can be used for anomaly detection and outlier identification.
• It can be used for market segmentation and customer profiling.

Disadvantages of Cluster Analysis:

• It can be sensitive to the choice of initial conditions and the number of clusters.
• It can be sensitive to the presence of noise or outliers in the data.
• It can be difficult to interpret the results of the analysis if the clusters are not well-defined.
• It can be computationally expensive for large datasets.
• The results of the analysis can be affected by the choice of clustering algorithm used.
• It is important to note that the success of cluster analysis depends on the data, the goals of the
analysis, and the ability of the analyst to interpret the results.
 Example Numerical Problem
A researcher wants to study the relationship between hours of study and marks obtained by students.
Student Hours of Study (X) Marks (Y)
A 2 20
B 3 25
C 5 35
D 6 40
E 8 50
Find the Karl Pearson Correlation Coefficient (r).

Step 1: Formula
𝒏∑𝑿𝒀 − (∑𝑿)(∑𝒀)
𝒓=
√[𝒏∑𝑿𝟐 − (∑𝑿)𝟐 ][𝒏∑𝒀𝟐 − (∑𝒀)𝟐 ]