Correlation analysis-meaning & types of correlation, Karl Person¶s coefficient of correlation and spearman¶s rank correlation; regression analysis

- meaning and two lines of regression; relationship between correlation and regression coefficient. Times series analysis- measurement of trend and seasonal variations; time series and forecasting.

Unit 2 A S Raheja asraheja@gmail.com 9717871155

Regression  Examples  Price and supply  Income & Expenditure  Correlation analysis is used to measure strength of the association (linear relationship) between two variables  Correlation is only concerned with strength of the relationship.  No causal effect is implied with correlation.  Reduces range of uncertainty.  Most widely used and widely abused statistical measure. .Correlation vs.

Types of Correlations  Issues with Correlation  Chance Coincidence  Influence of one on other or mutual dependence  Both being influenced by third variable  Methods  Scatter diagram  Karl Pearson¶s Coefficient of Correlation  Rank Method .

r<0 Y Y X No Correlation. r = 0 X X .Scatter Diagram + Correlation. r>0 Y Y Non Linear correlation X .Correlation.

Type of Correlation  A measure of the linear association between variables  ± Positive Correlation indicates positive linear relationship  ± Negative Correlation indicates a negative linear relationship  ± Values close to zero indicates no linear relationship  It not affected by the units of measurement for x and y variables  ± Pearson product moment correlation coefficient or Sample correlation coefficient. it is also referred to as Bi variate . r (used in case data is continuous)  It is a numerical index that reflects the linear relationship between two variables  The values of the descriptive statistic range between a value -1 (perfect ±ve correlation) to +1(perfect positive correlation) .

xy = sample covariance x = sample standard deviation of x y = sample standard deviation of y .Correlation Formula 1 W r ! WW xy xy x y _ _ 1 W XY ! n § ( X  X )(Y  Y ) 2 1 W x ! n §( X  X ) 1 ! W y n §(Y Y) 2 Where r = sample correlation coefficient.

r Covariance = 11.Calculating from Covariance Knowing the covariance and the standard deviations of each variable we can compute the sample correlation coefficient. y = 7.93 .93 So Pearson r = 11/(1.49 x 7.93) = 0.49. x = 1.

§ Y n 1 Y 2  (§ Y ) 2 § n 1 X 2  (§ X ) 2 § n .Correlation Formula 2 § XY  r! 1 § X .

Solution .

Assumed mean § xy  r! 1 § x.§ y n 1 y 2  (§ y ) 2 § n 1 x 2  (§ x) 2 § n x ! X a y !Y b .

Spearman¶s Rank Correlation  On some occasion it is not possible to measure the variables quantitatively or exact magnitude of the variable can not be determined  Numerical value of beauty  Measure taste of wine rs ! 1  6§ D 2 N ( N 2  1) .

Rules  When Rank are given ± above formula is sufficient  When Ranks are not given ± ranks are assigned by taking either the highest value as 1 or the lowest value as 1  Equal Ranks. in such case each individual is given an average rank . rank may be equal .in some cases.

Exercise 1 .

Exercise 2 .

Exercise 3 .

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