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X UNIVARIATE

Poisson Distribution

DATA

ANALYSES

Normal Distribution

X, Y ASSOCIATION,

BIVARIATE DATA ANALYSES INTER-

RELATIONSHIP,

X1, X2 , X3 , ……….. , Xn INTRA-

MULTIVARIATE RELATIONSHIP

DATA ANALYSES

BIVARIATE DATA ANALYSES

Association - CORRELATION

COEFFICIENT

•Is there an association between market share and size of sales force

where hard selling is concerned?

of prices?

car?

confidence?

Correlation Coefficient (r) is a statistic summarising the

strength and direction of association between two metric

(interval or ratio scaled) variables

• -1 ≤ r ≤ 1

• r is an absolute number

• r is a symmetric measure of association

• r measures the strength of LINEAR relationship

• r measures the direction of LINEAR relationship

have the same shape.

• r is inflated/deflated and over/underestimates the population

correlation coefficient, if the above assumption is violated.

•r = 0 does NOT IMPLY that the two variables have no relationship

there may exist a non-linear relationship

x2 + y2 = 27

The formula for

correlation

coefficient

Example:-

X Y

4 2

5 5

3 6

75 •Scatter Plot

Y 70

•Scatter diagram

65

60 •Scattergram

55

50

45

40

35

30

30 40 50 60 70 80

X

(Very low or negligible correlation)

75

70

65

60

55

50

45

40

35

30

30 40 50 60 70 80

75

70

65

60

55

50

45

40

35

30

30 40 50 60 70 80

(Very high correlation, quite close to 1.0)

75

70

65

60

55

50

45

40

35

30

30 40 50 60 70 80

Correlation is 0.926 (based on 20 observations)

Approximately 1.0 Near perfect LINEAR relation between

the 2 variables

X2

r(X1,X2 ) = - 0.827

X1 = a - bX2

X2 = c - dX1

X1

X1 X2 X3 X4 X5 X6 X7 X8 X9

X2 1.00 0.63 0.75 0.08 0.11 0.13 0.04 0.09

X3 1.00 0.84 0.02 0.12 0.07 0.15 0.05

X4 1.00 0.01 0.11 0.06 0.02 0.13

X5 1.00 0.93 0.02 0.05 0.03

X6 1.00 0.11 0.09 0.02

X7 1.00 0.95 0.90

X8 1.00 0.93

X9 1.00

correlation among themselves

The King Kong Effect is the influence, extreme observations can

exert on linear correlation between two variables.

75

70

65 r = 0.827

60

55

50

45

40 r = 0.027

35

30

30 40 50 60 70 80

MULTIVARIATE DATA ANALYSES

PARTIAL CORRELATION COEFFICIENT

A B

D C

rAB . C

rAB . CD

PARTIAL CORRELATION COEFFICIENT

the effect of price is controlled ?

force after adjusting for the effect of sales promotions ?

of prices when the effect of brand image is controlled ?

♦ Temperature affects both rainfall and yield of crop; how does one

find the true relation between rainfall and yield of crop?

determination), rxy.z is a measure of association between two

variables after controlling or adjusting for the effects of one or more

additional variables.

To find the true LINEAR relation between X1 and X2 we need to

adjust for the effect of X3

Correlation coefficient between (X1 - Est X1 ) and (X2 - Est X2 )

(Xi - Est Xi ) = From Xi deleting the part of Xi which is

explained by X3 , i = 1, 2

r12.3 = ………….. (1)

[(1- r132)(1- r232)] 1/2

correlation.

• (n+1)th order Partial Correlation Coefficient is obtained by

replacing simple Correlation Coefficient in equation (1) by the nth

order Partial Correlation Coefficient.

• r13 = 0 and r23 = 0, does it mean that r12 = 0 also?

X1 = performance, X2 = age, X3 = professional experience

r12 = 0.61, r13 = 0.82, r23 = 0.76

=> r12.3 = - 0.0357 => r12 = 0.61 is not the true picture.

actually diminishes with age !!!

Because, ‘professional experience’ is highly correlated with

Ex.2) X1 = sales, X2 = advertising expenditure,

X3 = size of sales force,

=> r12.3 = 0.9386 => Sales and advertising expenditure are related;

r12 = 0.9361 This relation is NOT due to the effect of size of

sales force on each of them

X2 ≡ Income, X3 ≡ Household size

=> r12.3 = 0.12

=>Correlation between income and consumption is spurious

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