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(Correlation)

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Correlation
 In Statistics Correlation denotes the relation
between to variables.
 If change in one variable is initiating change

in the other variable then it is said that there

is a correlation between them.
 There are two kinds of correlation. One is

Positive Correlation and the other is Negative

Correlation.

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Correlation
 Positive Correlation is said to exist when a
change in one variable is causing a positive
change in the other variable as well then it is
called Positive Correlation.
 For example, there is said to be a Positive

Correlation between Income and spending. As

income increases so is the purchasing power
and spending.

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Correlation
 Negative Correlation on the other hand is a
positive change in one variable causes a
negative change in the other variable.
 The best example for this is the demand

theory in Economics.
 We all know that when price of a product

increases then the demand of that product

decreases and when the price of the product
decreases then the demand increases.

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Correlation
 The result of Correlation can only range
between -1.00 and +1.00. If the answer is
-1.00 then it is called perfect Negative
Correlation and +1.00 denotes a perfect
Positive Correlation. 0.00 denotes that there
is no correlation at all.
 Let us understand the process of Correlation

with a good example.

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Correlation Example Problem

N (Student) 1 2 3 4 5 6 7 8 9 10

X (No.of 4 6 8 4 2 1 5 7 4 6
Hrs of
Study)
Y (Exam 85 80 92 70 65 60 89 82 81 95
Score)

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Correlation Example Problem
Student X (No.of Y(Exam XY
Study Score)
Hours)
1 4 85 340
2 6 80 480
3 8 92 736
4 4 70 280
5 2 65 130
6 1 60 60
7 5 89 445
8 7 82 574
9 4 81 324
10 6 95 570
Sum 47 799 3939

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Correlation Example Problem
 The Mean of X and Y are calculated to be 4.7
and 79.9 respectively. The Standard Deviation
of X and Y are calculated to be 2.1628 and
11.5706 respectively.
 Now, the formula for Correlation Coefficient

or Karl Pearson Correlation (r) is

 r =

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Correlation Example Problem
 Here, we can observe that the ∑XY = 3939; N
is the means of X and Y, calculated to be 4.7
and 79.9 respectively. Standard Deviation is
denoted by Sx and Sy which are calculated to
be 2.1628 and 11.5706. When we apply the
values we get
 r =

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 Correlation Example
Problem

 r= =

= 0.8156 = 0.82

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Correlation Example Problem
 The Coefficient Determination = r2 = 0.822 =
0.67 or 67%.
 Therefore, we can conclude that the score in

exams is directly related to the number of

hours studied to a significant extent. And we
can say that there is a positive correlation
between the Number of hours Studied and
the Scores obtained in Exams.

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