Correlation Analysis

Dr. Sitaram Pandey

spandey1203@gmail.com
 Definition
• In a distribution if the change in one variable effects a
change in the other variable, the variable are said to
be correlated(or there is a correlation between the
variables).
• Let X and Y measure some characteristics of a
particular system .To study the overall measure of the
system it is necessary to measure the
interdependence of X and Y.
• If the quantities(X,Y) vary in such a way that change
in one variable corresponds to change in the other
variable then the variables X and Y are correlated.
 Continued…………
• Correlation analysis is a process to find out the
degree of relationship between two or more
variables by applying various statistical tools and
techniques.
• Measures the degree of relation : It is used in
deriving the degree and direction of relationship
within the variables.
• Estimating values of variables i.e. if variables are
highly correlated then we can find value of variable
with the help of gives value of variable.
 Examples
• Relationship between the heights and weights.
• Relationship between the quantum of rainfall
and the yield of wheat.
• Relationship between the Price and demand of
commodity.
• Relationship between the dose of insulin and
blood sugar.
• Relationship between price and quantity
demanded
 Types of correlation
• The important ways of classifying the
correlation are:
– On the basis of degree of correlation
it is Positive and Negative.
– On the basis of number of variables it
is Simple , Partial and Multiple.
– On the basis of linearity it is Linear
and non-Linear.
 Methods of studying correlation
• The following are the important
methods of ascertaining correlation
between two variables.
– Scatter diagram method
– Karl Pearson’s Co-efficient
– Spearman’s Rank Correlation Co-
Efficient
– Method of least-squares
 Continued………
• Scatter Diagram Method: The simplest device
for studying correlation between two variables
is a special type of dot chart.
• Scatter diagrams are used to demonstrate
correlation between two quantitative
variables.
Features of Correlation Coefficient
• Ranges between –1 and 1
• The closer to –1, the stronger the negative
linear relationship
• The closer to 1, the stronger the positive
linear relationship
• The closer to 0, the weaker any positive
linear relationship
 The value of r lies between - 1 and +1

• If r=0 There exists no relationship between the variables.

• If +0.75 ≤r ≤ +1 There exists high positive relationship between
the variables .
• If -0.75 ≥ r ≥ -1 There exists high negative relationship between
the variables.
• If +0.5 ≤r ≤ 0.75 There exists Moderate positive relationship
between the variables .
• If -0.50 ≥ r >-0.75 There exists moderate negative relationship
between the variables.
• If r > -0.50 There exists low negative relationship between the
variables
• If r <0.5 There exists low positive relationship between the
variables .
Karl Pearson’s Correlation Coefficient
Continued………
 Illustration
• The following data relate to age of employees
and the number of days they reported sick in a
month. Calculate Karl Pearson’s coefficient of
correlation and interpret it.
Empl 1 2 3 4 5 6 7 8 9 10
oyees
Age 30 32 35 40 48 50 52 55 57 61

Sick 1 0 2 5 2 4 6 5 7 8
Days
Solution
 Bi-variate Frequency
• The following table gives the frequency ,
according to the marks , obtained by 67
students in an intelligence test. Measure the
degree of relationship between age and marks:
Age in Years Total
Test 18 19 20 21
Marks

200-250 4 4 2 1 11
250-300 3 5 4 2 14
300-350 2 6 8 5 21
350-400 1 4 6 10 21
Total 10 19 20 18 67
Solution
Calculate the coefficient of correlation
from the following bivariate frequency
distribution (Ans : r = 0.596)