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Correlation Analysis in Statistics

The document discusses hypothesis testing in correlation, illustrating how to measure the relationship between two variables using examples such as atmospheric temperature and fruit shake sales. It details the calculation of Pearson's correlation coefficient and the steps to test hypotheses, concluding that there is a significant positive correlation between temperature and sales. Additionally, it prompts the reader to explore another correlation study involving the number of cars a company has and its annual revenue.

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Jun Perez
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3 views10 pages

Correlation Analysis in Statistics

The document discusses hypothesis testing in correlation, illustrating how to measure the relationship between two variables using examples such as atmospheric temperature and fruit shake sales. It details the calculation of Pearson's correlation coefficient and the steps to test hypotheses, concluding that there is a significant positive correlation between temperature and sales. Additionally, it prompts the reader to explore another correlation study involving the number of cars a company has and its annual revenue.

Uploaded by

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

Hypothesis Testing:

Correlation
MATH 314 – Statistical Theory
Mr. John Laurence U. Candido
Correlation

❑ Used to measure the degree of relationship between


two variables
❑ Examples:
1. Number of hours studying & final grade
2. Student’s grade in Math and English
3. Hours of playing mobile games & grade in STS-301
❑ Two-tailed critical values are used
❑ Both variables must come from normally distributed
populations
Correlation
Example 1:
The owner of a chain of fruit shake store would like to study
the correlation between atmospheric temperature and sales during
summer season. A random sample of 6 days is selected with the
result given as follows: use α = 0.05.
Day Temp (F) Sales (units)
1 79 147
2 76 143
3 78 147
4 84 168
5 90 206
6 83 155
Correlation
Solution:
𝑁 σ 𝑥𝑦−(σ 𝑥)(σ 𝑦)
Pearson r =
(𝑁(σ 𝑥 2 )−(σ 𝑥)2 )(𝑁(σ 𝑦 2 )−(σ 𝑦)2 )

Day Temp (F) (x) Sales (units) (y) 𝒙𝟐 𝒚𝟐 𝒙𝒚


1 79 147 6241 21609 11613
2 76 143 5776 20449 10868
3 78 147 6084 21609 11466
4 84 168 7056 28224 14112
5 90 206 8100 42436 18540
6 83 155 6889 24025 12865

Σ𝑥 = 490 Σ𝑦 = 966 Σ𝑥 2 = 40146 Σ𝑦 2 = 158352 Σ𝑥𝑦 = 79464


Correlation
Solution:
𝑁 σ 𝑥𝑦−(σ 𝑥)(σ 𝑦)
Pearson r =
(𝑁(σ 𝑥 2 )−(σ 𝑥)2 )(𝑁(σ 𝑦 2 )−(σ 𝑦)2 )

6 79464 −(490)(966)
r=
(6 40146 −(490)2 )(6 158352 −(966)2 )

r = 0.95
Correlation
Solution:
1. 𝐻0 : r = 0 (There is no correlation between atmospheric
temperature and total sales of fruit shake.)
𝐻𝑎 : r ≠ 0 (There is a correlation between atmospheric
temperature and total sales of fruit shake.)
2. 𝛼 = 0.05, two tailed test
𝑁 σ 𝑥𝑦−(σ 𝑥)(σ 𝑦)
3. Pearson r = 2 2 2 2
, 𝑟0.05/2(𝑛−2=4) = 0.811
(𝑁(σ 𝑥 )−(σ 𝑥) )(𝑁(σ 𝑦 )−(σ 𝑦) )
4. Reject 𝐻𝑜 , if |r| > 𝑟𝛼 . Otherwise, we fail to reject the null
hypothesis.
Correlation
Solution:
5. 𝑟 = 0.9494
6. Since |r| = 0.9494 > 𝑟𝛼 = 0.811, reject the null hypothesis in
favor of the alternative hypothesis.
7. Thus, we conclude that there is a correlation between
atmospheric temperature and total sales of fruit shake.
Correlation
State the Conclusion.
Answer the following question:
1. Is there a relationship between the two variable being tested?
2. What degree is the relationship or correlation?

1. There is a significant
relationship between
atmospheric temperature
and total sales of fruit shake.
2. The correlation is a very
high positive correlation.
Correlation
Try this!:
As researcher wants to study the correlation between
number of cars a company have and the company’s annual revenue.
A random sample of 6 company is selected with the result given as
follows: use α = 0.05.
Company Cars (in 10, 000) Revenue (in Billions)
A 63.0 7.0
B 29.0 3.9
C 20.8 2.1
D 19.1 2.8
E 13.4 1.4
F 8.5 1.5
THANK YOU VERY MUCH!
KEEP SAFE!
GOD BLESS!

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