Topic: Pearson’s Correlation

Learning Outcome: To compute and interpret the Pearson’s Correlation.

1.SJS Company has been selling to retail customers in the Bohol area. They advertise
extensively on radio, print ads, and in the internet. The owner would like to review the
relationship between the amount spent on advertising expense (in P000s) and sales(in
P000s). Below is the information on advertising expense and sales for the last 9 months.
Month Jan Feb Mar Apr May June July Aug Sept
Advertising 10 12 11 9 13 15 10 4 18
Expense
Sales Revenue 180 170 190 220 235 350 250 175 250

Compute the correlation Pearson r. (show your solutions) Just check your R-value using Microsoft excel.
Formula

n(∑xy) −(∑x) (∑y)

r=
√[ �� ∑x² − (∑x)²][n∑y² − (∑y)²]

Computation

x y x² y² xy n 10 180 100 32,400 1,800 1 12 170 144 28,900 2,040 2 11 190 121 36,100

2,0901 3 91 220 81 48,400 1,980 4 13 235 169 55,225 3,055 5 15 350 225 122,500 5,250 6 10

250 100 62,500 2,500 7 4 175 16 30,625 700 8 18 250 324 62,500 4,500 9 x= 102 y= 2020 x²=

1,280 y²= 479,150 xy= 23,915

 (9) (23,915) – ( 102) (2,020)

r= √[(9)(1,280) − (102)2][(9)(479,150) − (2,020)²

= 215,235 – 206,040
√[11,520 − 10,404][4,312,350 − 4,080,400]

= 9,195
√[1,116][231,950]
= 9,195

√258,856,200
= 9,195
16,089.00867

r= 0.57

Interpretation of Pearson R-value

➢ The 0.57 coefficient correlation means that there is a moderate relationship between
the amount spent on advertising expense and sales.

Conclusion (Compare the relationship between the two variables)

➢ Thus, the 0.57 coefficient correlation with a moderate relationship between the amount spent
on advertising expense and sales indicates that there is a direct or positive correlation between
the two variables because the value of 0.57 is greater than zero. Therefore, as the amount spent
on advertising expense (x) increases in value, the sales (y) also increase in value

B. The owner of a chain of fruit shake stores would like to study the correlation between
atmospheric temperature and sales during the summer season. At random sample of 12
days is selected with the results given as follows:
Day 1 2 3 4 5 6 7 8 9 10 11 12

Temperatu 90 76 78 84 100 83 93 94 97 85 88 82
re (℉)

Total 247 143 150 168 206 155 192 211 209 187 200 15
Sales 0
(units)

Compute the correlation Pearson r. (show your solutions) Just check your R-value using
Microsoft excel.
Formula

n(∑xy) −(∑x) (∑y)

r=
√
[ �� ∑x2 − (∑x)2][n∑y² − (∑y)²]
Computation

x y x² y² xy n 90 247 8,100 61,009 22,230 1 76 143 5,776 20,449 10,868 2 78 150 6,084

22,500 11,700 3 84 168 7,056 28,224 14,1121 4 100 206 10,000 42,436 20,6001 5 83 155

6,889 24,025 12,865 6 93 192 8,649 36,864 17,856 7 94 211 8,836 44,521 19,834 8 97 209

9,409 43,681 20,273 9 85 187 7,225 34,969 15,895 10 88 200 7,744 40,000 17,600 11 82 150

6,724 22,500 12,300 12

x= 1,050 y= 2,218 x²= 92,492 y²= 421,178 xy= 196,1331

(12) (196,133) – (1,050) (2,218)

r= √[ (12)(92,492) − (1,050)2][ (12)(421,178) − (2,218)2]

= 2,353,596 – 2,328,900
√[1,109,904 − 1,102,500][5,054,136 − 4,919,524]

= 24,696
√[7,404][134,612]

= 24,696
√996,667,248

= 24,696
31,570.03719
r= 0.78

Interpretation of R-value

➢ The 0.78 coefficient correlation means that there is a strong relationship between
atmospheric temperature and sales during the summer season.

Conclusion

➢ Thus, the 0.78 coefficient correlation with a strong relationship between the atmospheric
temperature and sales indicates that there is a direct or positive correlation between the
two variables because the value of 0.78 is greater than zero. Therefore, as the
temperature (x) increases in value, the sales (y) also increase in value.