## Are you sure?

This action might not be possible to undo. Are you sure you want to continue?

)

3 September 2012

1

CORRELATION

If two quantities vary in such a way that movements of one are accompanied by movements of others then these quantities are said to be correlated. Ex: relationship between price of commodity and amount demanded, Increased in amount of the rainfall and the production of rice The degree of relationship between variables under consideration is measured through the correlation analysis. The measure of correlation is called the correlation coefficient or correlation index ( usually denoted by r or ρ ) 3 September 2012 2 The correlation analysis refers to the techniques

DEFINITIONS

• Correlation analysis deals with the association between two or more variables. Simpson and Kafka • Correlation is an analysis of co variation between two or more variables. A.M.Tuttle • If two or more quantities were in sympathy so that the movement of one tend to be accompanied by the corresponding movements in the other then they are said to be correlated 3 September 2012 3 L.R.Conner

ANALYSIS

• The problem of analyzing the relation between different series should be broken down in to three steps 1. Determining whether a relation exists and if it does, measuring it. 2. Testing whether it is significant. 3. Establishing the cause and effect relation if any.

3 September 2012

4

**SIGNIFICANCE OF THE STUDY OF CORRELATION
**

Most of the variables show some kind of relationship

Once we know that two variables are closely related we can estimate the value of one variable given the value of another. Correlation analysis contributes to the understanding of the economic behavior The effect of correlation is to reduce the range of 3 September 2012 uncertainty

5

**CORRELATION AND CAUSATION
**

1. The correlation may be due to pure chance especially in a small sample.

Income(rs) 500 Weight(lbs 120 )

600 140 700 160 800 180 900 200

The above data show a perfect positive relationship between income and weight i.e., as the income is increasing the weight is increasing and the rate of change between two variables is the same.

3 September 2012 6

2. Both the correlated variables may be influenced by one or more other variables. 3. Both the variables may be mututally influencing each other so that neither can be designated as the cause and the other the effect. Correlation observed between variables that cannot conceivably be casually related is called spurious or nonsense correlation

3 September 2012 7

TYPES OF CORRELATION

Positive or negative Linear and non linear correlation Simple , partial and multiple correlation

3 September 2012

8

**POSITIVE OR NEGATIVE CORRELATION
**

• Whether the correlation is positive or negative would depend up on the direction of the change of the variable. • If both the variables are varying in the same direction , then the correlation is said to be positive. • If the variables are varying in opposite direction the correlation is said to be negative

3 September 2012

9

Positive correlation

X Y 10 15 12 20 15 22 18 25 20 37

Y-Values

40 35 30 25 20

15

10 5

0

0

3 September 2012

5

10

15

20

25

10

Negative correlation

X Y 20 40 30 30 40 22 60 15 80 10

Y-Values

45 40 35 30 25 20 15 10 5 0 0

3 September 2012

20

40

60

80

100

11

**SIMPLE PARTIAL AND MULTIPLE CORRELATION
**

• The distinction between simple partial and multiple correlation is based up on the number of variables studied. • When only two variables are studied it is a problem of simple correlation • When three or more variable are studied it is problem of either multiple or partial correlation. • In multiple correlation three or more variables are studied simultaneously. • On the other hand in partial correlation we recognize more than two variables but consider only two variables to be influencing each other the effect of 3 September 2012 12 other influencing variable kept constant.

•

LINEAR AND NONLINEAR(CURVILINEAR) CORRELATION correlation Distinction between linear and non linear

is based up on the constancy of the ratio of change between the variables. • If the amount of change in one variable tends to bear constant ratio to the amount of change in the other variable then the correlation is said to be linear.

X Y 10 70 20 140 30 210 40 280 50 350

It is clear that the ratio of change between the two variables is the same. • September 2012variables are plotted on the graph paper all 3 If such the plotted points would fall on a straight line.

13

400 350 300 250 200 150

100

50 0 0 10 20 30 40 50 60

3 September 2012

14

Correlation would be called non linear or curvilinear if the amount of change in one variable does not bear a constant ratio with the amount of change in the other variable.

3 September 2012

15

**METHODS OF STUDYING CORRELATION
**

1. Scatter diagram 2. Graphic method 3. Karl Pearson’s coefficient of correlation. 4. Concurrent Deviation Method 5. Method of least squares

3 September 2012 16

**SCATTER DIAGRAM METHOD
**

• The simplest device for ascertaining if the two variables are related is to prepare a dot chart called scatter diagram. • When this method is used the given data are plotted on a graph paper in the form of dots. I.e., for each pair of X and Y values we put a dot and thus obtain as many points as the number of observations. • By looking to the scatter of the various points we can form an idea as to whether the variables are related or not. • The greater the scatter of the plotted points on the chart the lesser is the relationship between the two 3 September 2012 17 variables

• If all the points lie on a straight line falling from the lower left hand corner to the upper right hand corner the correlation is said to be perfectly positive(r=1)

8 7 6

5

4 3 2 1 0 0

3 September 2012

2

4

6

8

18

If all the points are lying on a straight line rising from the upper left hand corner to the lower right hand corner of the diagram correlation is said to be perfectly negative.

8

7 6 5 4 3 2 1

0

0 1 2 3 4 5 6 7 8

19

3 September 2012

• If the plotted points fall in a narrow band there would be a high degree of correlation between the variables. • If the points are widely scattered over the diagram it indicates very little relation ship between the 10 variables. 10

8 6 4 2 0 0 5 10

HIGH DEGREE OF POSITIVE CORRELATION

8

6 4 2 0 0 5 10

LOW DEGREE OF POSITIVE CORRELATION

3 September 2012

20

If the plotted points lie in a haphazard manner it shows the absence of any relationship between the variables

8

7 6 5 4 3 2 1 0 0 2 4 6 8 10 12 14

3 September 2012

21

EXAMPLE:

X Y 14 12 10 8 6 4 2 0 0

3 September 2012

2 6

3 5

5 7

6 8

8 12

2

4

6

8

10

22

• By looking at the scattered diagram we can say that the variables x and y are correlated. Further the correlation is positive because the trend of the points is upward rising from the lower left hand corner to the upper right hand corner of the diagram. • It also indicates that the degree of relationship is higher because the plotted points are near to the line which shows perfect relationship between the variables.

3 September 2012

23

**MERITS AND LIMITATIONS
**

MERIT S It is a simple and non mathematical method of • studying correlation between variables. • As such it can be easily understood and a rough idea can very quickly be formed as to whether or the variables are related. • It is the first step in investigating relationship between 2 variables. LIMITATIONS: • By applying this method we can get an idea about the direction of correlation and also whether it is high or low • September 2012cannot establish the exact degree of But we 3 24 correlation between the variables as is possible by

GRAPHIC METHOD

• When this method is used the individual values of the two variables are plotted on the graph paper. • We thus obtain 2 curves. One for x variable and another for y variable. • By examining the direction and closeness of the two curves so drawn we can infer if the variables are related or not. • If both the curves drawn on the graph are moving in the same direction (either upward or downward)then the correlation is said to be positive. • On the other hand if the curves are moving in the opposite direction correlation is said to be negative.

3 September 2012 25

Year

1979 1980 1981 1982

Average income

100 102 105 105

Average expenditure

90 91 93 95

1983

1984

101

112

92

94

3 September 2012

26

120

INCOME

100 80 60 40 20 0

EXPENDITURE

Series 1 Series 2

1979

1980

1981

1982

1983

1984

3 September 2012

27

**KARL PEARSON’S COEFFICIENT OF CORRELATION
**

• Among several mathematical methods of measuring correlation, the Karl Pearson’s method, popularly known as Pearson’s coefficient of correlation, is most widely used in practice • It is denoted by the symbol ρ or r

3 September 2012

28

CORRELATION COEFFICIENT

• If [X,Y] is a two dimensional random variable, the correlation coefficient, denoted r, is

σX σY

ρ=Cov(X,Y) ∕ Var(X) . Var(Y)

= σXY ∕

• This is also called as PEARSON CORRELATION COEFFICIENT

σX σY

**ρ= ∑xy ∕ √ (∑x2 * ∑y2)
**

, where

= ∑xy ∕ N

3 September 2012

x=(X-X’) ; y=(Y-Y’) σX = Standard Deviation of X and σY = Standard Deviation of Y

29

• Take the deviations of X from the mean of X and denote by x

STEPS TO CALCULATE CORRELATION COEFFICIENT

• Square these deviations and obtain the total i.e., Σx2

**• Take the deviations of Y from the mean of Y and denote by y
**

• Square these deviations and obtain the total i.e., Σy2 • Multiply the deviations of X and Y and obtain the total i.e., Σxy

3 September 2012 30

EXAMPLE

• Calculate the Karl Pearson’s Correlation Coefficient from the following data and interpret it’s value Roll no of students: 1 2 3 4 5 Marks in Accountancy : 48 35 17 23 47 Marks in Statistics: 45 20 40 25 45 SOLUTION: Let marks in Accountancy be denoted by X and Statistics by Y

3 September 2012 31

Roll no

1

X

(X34) x

14

x2

Y

(Y-35) y

10

y2

xy

48

196

45

100

140

2

3 4 5

35

17 23 47

1

-17 -11 13 ∑x=0

1

289 121 169

20

40 25 45

-15

5 -10 10

225

25 100 100 ∑y2=55 0

-15

-85 110 130 ∑xy=28 0

32

∑Y=175 ∑y=0 ∑x2=77 6

∑X=170

3 September 2012

• The Pearson’s coefficient of correlation is

**ρ= ∑xy ∕ √(∑x2 *∑y2)
**

where x=(X-X’); y=(Y-Y’) , X'= ∑X ∕ N; Y’=∑Y ∕ N ∑xy=280 ∑x2=776 ∑y2=550

ρ = 280 ∕ √ (776 * 550) = 0.496

3 September 2012

33

DEGREE OF CORRELATION

• The value of ρ always lies between -1 and 1. • If ρ lies between 0 and 1, it is positive. Else, if it lies between -1 and 0, it is negative

**• If ρ=1, then the two variables are said to be perfect positively correlated
**

• If ρ=-1, then the two variables are said to be perfect negatively correlated • If ρ=0, then the two variables are not correlated

3 September 2012

34

3 September 2012

35

- Effect of Late sitting on employee performance-1.pdf
- ch3
- Spss Results
- Research Article
- Pearson r Spss Method
- Linear Correlation-based Feature Selection For
- STAT.pdf
- Employee Satisfaction Survey
- Quality Tools
- CH6
- End Term Paper2
- Correlation
- Toebe 2017 Direct Effects on Scenarios and Types of Path Analysis in Corn Hybrids
- Up Work Formulas
- Application of Principal Components
- Conflict Management
- Goal Setting Atlethes
- Ekam Candle
- Statistical Analysis
- An Examination
- The Effects (2)
- The Relation of Dengue Hemorrhagic Fever
- A Pilot Study on Factors Affecting the Use Of
- quality management seminars.docx
- Basic Statstics Exam
- recent trends in quality management.docx
- software for quality management.docx
- Session 1 Part2A Handout (1)
- Factor Analysis
- Afari, E., Aldridge, J. M., Fraser, B. J., & Khine, M. S. (2013)

Skip carousel

- The San Francisco Polar Bear Swim Study
- RIEF June
- tmp4E56.tmp
- tmp329E.tmp
- Tenth-Grade WASL in Spring 2006
- Business Statistics/Series-2-2011(Code3009)
- tmpE13F.tmp
- 66330_1975-1979
- tmp207A
- tmp57E6.tmp
- The Influence of Corporate Culture on Organizational Commitment
- Tmp 3371
- fcic_docs_moodys_financedefault_20100602.pdf
- tmp698D
- Timeliness of Annual Report Releases in Relation to the Direction and Magnitude of Earnings and Share Price Revaluation
- Variation of PEFR with Height, Weight and Waist-Hip Ratio in Medical Students
- tmpD799.tmp
- 68456_1975-1979
- tmpBBDE.tmp
- IQS Factors
- ifdp1178
- econcomm_19900101.pdf
- tmp4193.tmp
- tmp9817.tmp
- Tmp 2069
- Rev Frbclev 196105
- frbrich_wp13-3.pdf
- tmpB2E7.tmp
- tmp6C8A.tmp
- tmp2548.tmp

- Mobile DBMS
- Object Type Casting in JAVA
- Trends and Technologies in System Softwares
- Solution of Linear Programming Problem
- Model View Controller Pattern and Implementation in Java
- Primal Dual LPP
- UNIX Memory Management
- Solaris Memory Management
- Symbol Table Design (Compiler Construction)
- Inner Classes & MultiThreading in JAVA
- Mutable and Immutable Classes in JAVA
- Windows Memory Management
- TSR (Terminate and Stay Resident)
- Software Engineering Principles in System Software Design
- VisibilityControl in Java
- Applications of GRAPHS
- Buddy System in Operating Systems
- E-post Office System
- Investment Problem (Optimization Technique)
- Combined Paging and Segmentation
- Client Computing Evolution
- Dynamic Memory Allocation in c++
- Inheritance in Java
- Event Processing Model in c# and Java
- JAVA vs .NET
- How to Draw an ER Diagram
- Client-Server models
- Input Output Processing (8086)
- Introduction to Ajax

Sign up to vote on this title

UsefulNot usefulRead Free for 30 Days

Cancel anytime.

Close Dialog## Are you sure?

This action might not be possible to undo. Are you sure you want to continue?

Linear Correlation will be available on

Loading