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Understanding Correlation Analysis

This document discusses correlation and the correlation coefficient. It defines correlation as a linear relationship between two variables where the correlation coefficient r ranges from -1 to 1 to indicate the strength and direction of the linear relationship. The types of correlation discussed are perfect positive/negative correlation, moderate positive/negative correlation, and no correlation. Limitations of correlation and real-life applications are also covered. Methods to measure correlation like scatter diagrams, Karl Pearson's correlation coefficient, and Spearman's rank correlation coefficient are outlined.

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Lavanya Shetty
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86 views24 pages

Understanding Correlation Analysis

This document discusses correlation and the correlation coefficient. It defines correlation as a linear relationship between two variables where the correlation coefficient r ranges from -1 to 1 to indicate the strength and direction of the linear relationship. The types of correlation discussed are perfect positive/negative correlation, moderate positive/negative correlation, and no correlation. Limitations of correlation and real-life applications are also covered. Methods to measure correlation like scatter diagrams, Karl Pearson's correlation coefficient, and Spearman's rank correlation coefficient are outlined.

Uploaded by

Lavanya Shetty
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

CORRELATION

Dr D Nabirasool
CONTENT
 Introduction

 Definition

 Types Of Correlation
 Correlation Coefficient

 Types of Correlation Coefficient

 Limitation Of Correlation

 Applications

 Problems
INTRODUCTION
 The word Correlation is made of Co- (meaning
"together"), and Relation
 Correlation means a relation between two or more
things. Ex. Price and Demand
Demand and price
 One of the best statistical tests out there, in my
opinion, is the correlation. Correlation is a mutual
relationship between two variables.
 Correlation analysis show us how to determine
both the nature and strength of relationship
between two variables.
DEFINITION
A correlation is a linear relationship between two
variables. Correlation measures the linear association
between two variables.

A statistic representing how closely two variables co-


vary; it can vary from -1 (perfect negative correlation)
through 0 (no correlation) to +1 (perfect positive
correlation).
 The correlation coefficient, denoted by r, is a
measure of the strength of the straight-line or
linear relationship between two variables. The
correlation coefficient takes on values ranging
between +1 and -1.

 The quantity r, called the linear correlation


coefficient, measures the strength and the direction
of a linear relationship between two variables
TYPE OF CORRELATION COEFFICIENT

1. Perfect Positive correlation


2. Perfect negative correlation
3. Moderately Positive correlation
4. Moderate negative correlation
5. Absolute no correlation
1. Perfect Positive correlation
 If x and y have a strong positive linear
correlation, r is close to +1. An r value of
exactly +1 indicates a perfect positive fit.
Positive values indicate a relationship between x
and y variables such that as values for x
increases, values for y also increase.
2. Perfect negative correlation
 If x and y have a strong negative linear
correlation, r is close to -1. An r value of exactly
-1 indicates a perfect negative fit. Negative
values indicate a relationship between x and y
such that as values for x increase, values for y
decrease.
 Moderately Positive correlation
0<r<1
 Moderate negative correlation

-1<r<1
Absolute no correlation
 If there is no linear correlation or a weak
linear correlation, r is close to 0. A value
near zero means that there is a random,
nonlinear relationship between the two
variables
LIMITATIONS OF CORRELATION

 Although correlation is a powerful tool, there are


some limitations in using it:
[Link] does not completely tell us everything
about the data. Means and standard deviations
continue to be important.
[Link] data may be described by a curve more
complicated than a straight line, but this will not
show up in the calculation of r.
[Link] because two sets of data are correlated, it
doesn't mean that one is the cause of the other.
APPLICATION
REAL LIFE Application Of Positive Correlation

[Link] the number of trees cut down increases, the


probability of erosion increases.
[Link] a student’s study time increases, so does his test
average.
[Link] a child grows, so does his clothing size.
[Link] her salary increased, so did her spending.
 REAL LIFE Application Of Negative Correlation
METHODS TO MEASURE CORRELATION

 Scatter Diagram- simplest method to measure the


relation without calculating any numerical value
 Karl pearson’s correlation coefficient

 Spearman’s rank correlation coefficient


SCATTER DIAGRAM-
KARL PEARSON’S CORRELATION COEFFICIENT

 Steps
1. Calculate the mean of both variables i.e. X and Y
2. Calculate the Standard deviation of both
3. Calculate €xy (sigma xy)

Formulas for karl pearson’s correlation


1.

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