Lecture 14

Correlation

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DEFINITION
A correlation exists between two variables when
the values of one variable are somehow
associated with the values of the other variable.

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 Linear Correlation
DEFINITION
A linear correlation exists between two variables
when there is a correlation and the plotted points
of paired data result in a pattern that can be
approximated by a straight line.

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Scatter Diagram and correlation coefficient:
A scatter diagram reveals relationships or association
between two variables.
This diagram is drawn with two variables, usually the
first variable is independent 𝑋 and the second variable is
dependent 𝑌 on the first variable.
If the variables are correlated, the points will fall along
a line (or curve). The better the correlation, the tighter
the points will hug the line.
According to the type of correlation, scatter diagrams
can be divided into following categories:
Scatter Diagram with No Correlation
Scatter Diagram with perfect Linear Correlation
Scatter Diagram with Strong Linear Correlation
Scatter Diagram with Weak Linear Correlation

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A perfect positive correlation is given A perfect negative correlation is Low positive correlation is given the
the value of 1. given the value of -1. value close to 0.

High positive correlation is given the High negative correlation is Low negative correlation is given
value close to 1. given the value close to -1. the value close to 0.

This type of diagram is also

known as “Scatter Diagram with
Zero Degree of Correlation”.

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 Correlation
Pearson correlation coefficient
 The degree of relationship between the variables under consideration is
measure through the correlation analysis. The measure of correlation called
the correlation coefficient (r). Also called Pearson product-moment
correlation coefficient.
For a set of 𝑛 data points, the linear correlation coefficient is defined by

 The linear correlation coefficient is a descriptive measure of the strength

and directionof the linear (straight-line) relationship between two variables

Positive Correlation: The correlation is said to be positive correlation if the

values of two variables changing with same direction.

 Negative Correlation: The correlation is said to be negative

correlation whenthe values of variables change with opposite direction.

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 The values of the coefficient vary from –1, which indicates perfect
negative correlation, to +1, which indicates perfect positive correlation.
A value closer to 1 it indicates a strong positive relationship, a value of
0 indicates that there is no relationship. Values close to -1 signal a
strong negative relationship between the two variables.

Various degrees of linear correlation

0.0-0.19 0.20 – 0.39 0.40 – 0.59 0.60 – 0.79 0.80 – 1.0

Very weak Weak Moderate Strong Very strong

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 This Correlation Coefficient takes values between (0-1),
positive Or negative. That is, r = ( from -1 up to +1).

 Positive : When both variables move the Same direction,

increase Or decrease Together.

 Negative : When they move the Opposite directions, one

increases and the other decreases, Or the other way round.
The formula used to calculate “r” is given by :

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 Example :

The following are the data for two variables X and Y

X 7 4 4 20 10 12 0 11 10 9 2 1

Y 6 4 5 2 3 1 10 4 5 2 8 9

1. Draw scatter diagram

2. Compute the Pearson correlation coefficient for the data.
3. Interpret the result in terms of the relationship between the two
variables

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Solution

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 X Y XY X2 Y2
7 6 42 49 36
4 4 16 16 16
4 5 20 16 25
20 2 40 400 4
10 3 30 100 9
12 1 12 144 1
0 10 0 0 100
11 4 44 121 16
10 5 50 100 25
9 2 18 81 4
2 8 16 4 64
1 9 9 1 81
90 59 297 1032 381

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 σ𝒙σ𝒚
σ 𝒙𝒚 −
r= 𝟐
𝒏
𝟐
(σ 𝒙) (σ 𝒚)
[σ 𝒙𝟐 − ] [σ 𝒚𝟐 − ]
𝒏 𝒏

𝟐𝟗𝟕 −
90x59
𝟏𝟐
r=
𝟗𝟎𝟐 𝟓𝟗𝟐
[𝟏𝟎𝟑𝟐 − ][𝟑𝟖𝟏 − ]
𝟏𝟐 𝟏𝟐

r = −𝟎. 𝟖𝟎𝟖
Comment:
 The linear correlation coefficient, r = −0.808, suggests a very strong
negative linear correlation between reading hours and score.
 In particular, it indicates that as reading hours increases, there is a
strong tendency for score to decrease.
 Because the correlation coefficient, r = −0.808, is quite close to −1,
the data points should be clustered closely about the regression line

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