CORRELATION

Correlation
• Correlation is a statistical tool that helps
to measure and analyze the degree of
relationship between two variables.
• Correlation analysis deals with the
association between two or more
variables.
 Correlation
• Correlation: The degree of relationship between the
variables under consideration is measure through the
correlation analysis.
• The measure of correlation called the correlation coefficient
• The degree of relationship is expressed by coefficient which
range from correlation ( -1 ≤ r ≤ +1)
• The direction of change is indicated by a sign.
• The correlation analysis enable us to have an idea about the
degree & direction of the relationship between the two
variables under study.
 Types of Correlation
Type I

Correlation

Positive Correlation Negative Correlation

Types of Correlation Type I
• Positive Correlation: The correlation is said
to be positive correlation if the values of two
variables changing with same direction.
Ex. Height & weight.

• Negative Correlation: The correlation is said

to be negative correlation when the values of
variables change with opposite direction.
Ex. Price & qty. demanded.
 Direction of the Correlation
• Positive relationship – Variables change in the same
direction.
• As X is increasing, Y is increasing Indicated by
• As X is decreasing, Y is decreasing sign; (+) or (-).
• E.g., As height increases, so does weight.
• Negative relationship – Variables change in opposite
directions.
• As X is increasing, Y is decreasing
• As X is decreasing, Y is increasing
• E.g., As TV time increases, grades decrease
 More examples
• Positive relationships • Negative relationships:
relationships
• water consumption • alcohol consumption
and temperature. and driving ability.
• study time and • Price & quantity
grades. demanded
Types of Correlation
Type II

Correlation

Simple Multiple

Partial Total
 Types of Correlation Type II
• Simple correlation: Under simple correlation
problem there are only two variables are studied.

• Multiple Correlation: Under Multiple Correlation

three or more than three variables are studied.

• Partial correlation: analysis recognizes more than

two variables but considers only two variables
keeping the other constant.
Types of Correlation
Type III

Correlation

LINEAR NON LINEAR

 Types of Correlation Type III
• Linear correlation: Correlation is said to be linear
when the amount of change in one variable tends to
bear a constant ratio to the amount of change in the
other. The graph of the variables having a linear
relationship will form a straight line.
Ex X = 1, 2, 3, 4, 5, 6, 7, 8,
Y = 5, 7, 9, 11, 13, 15, 17, 19,
Y = 3 + 2x
• Non Linear correlation: The correlation would be non
linear if the amount of change in one variable does not
bear a constant ratio to the amount of change in the
other variable.
Methods of Studying
Correlation
• Scatter Diagram Method
• Karl Pearson’s Coefficient of
Correlation
• Spearmans rank correlation
Scatter Diagram Method

• Scatter Diagram is a graph of observed

plotted points where each points
represents the values of X & Y as a
coordinate. It portrays the relationship
between these two variables
graphically.
 A perfect positive
correlation
Weight
Weight
of B
Weight A linear
of A
relationshi
p

Height
Height Height
of A of B
High Degree of positive correlation
• Positive relationship

r = +.80

Weight

Height
 Degree of correlation
• Moderate Positive Correlation

r = + 0.4
Shoe
Size

Weight
 Degree of correlation
• Perfect Negative Correlation

r = -1.0
Frequency
of using
Mobile

Exam score
 Degree of correlation
• Moderate Negative Correlation

r = -.80
Frequency
of using
Mobile

Exam score
 Degree of correlation
• Weak negative Correlation

IQ
r = - 0.2

Weight
 Degree of correlation
• No Correlation (horizontal line)

r = 0.0
IQ

Height
 Degree of correlation (r)
r = +.80 r = +.60

r = +.40 r = +.20
 2) Direction of the Relationship
• Positive relationship – Variables change in the same
direction.
• As X is increasing, Y is increasing Indicated by
• As X is decreasing, Y is decreasing sign; (+) or (-).
• E.g., As height increases, so does weight.
• Negative relationship – Variables change in opposite
directions.
• As X is increasing, Y is decreasing
• As X is decreasing, Y is increasing
• E.g., As TV time increases, grades decrease
Advantages of Scatter
Diagram
• Simple & Non Mathematical method
• Not influenced by the size of extreme
item
• First step in investing the relationship
between two variables
 Disadvantage of scatter
diagram

Can not adopt the an exact degree of

correlation
 Karl Pearson's
Coefficient of Correlation
• Pearson’s ‘r’ is the most common
correlation coefficient.
• Karl Pearson’s Coefficient of Correlation
denoted by- ‘r’ The coefficient of
correlation ‘r’ measure the degree of
linear relationship between two variables
say x & y.
 Karl Pearson's
Coefficient of Correlation
 Karl Pearson’s Coefficient of
Correlation denoted by- r
-1 ≤ r ≤ +1
 Degree of Correlation is expressed by a
value of Coefficient
 Direction of change is Indicated by sign

( - ve) or ( + ve)
 Karl Pearson's
Coefficient of Correlation
• When deviation taken from actual mean:
r(x, y)= Σxy /√ Σx² Σy²
• When deviation taken from an assumed
mean:
r= N Σdxdy - Σdx Σdy
√N Σdx²-(Σdx)² √N Σdy²-(Σdy)²
 Procedure for computing the
correlation coefficient
• Calculate the mean of the two series ‘x’ &’y’
• Calculate the deviations ‘x’ &’y’ in two series from their
respective mean.
• Square each deviation of ‘x’ &’y’ then obtain the sum of
the squared deviation i.e.∑x2 & .∑y2
• Multiply each deviation under x with each deviation under
y & obtain the product of ‘xy’.Then obtain the sum of the
product of x , y i.e. ∑xy
• Substitute the value in the formula.
 Interpretation of Correlation
Coefficient (r)
• The value of correlation coefficient ‘r’ ranges from -1
to +1
• If r = +1, then the correlation between the two
variables is said to be perfect and positive
• If r = -1, then the correlation between the two
variables is said to be perfect and negative
• If r = 0, then there exists no correlation between the
variables
 Properties of Correlation
coefficient
• The correlation coefficient lies between -1 &
+1 symbolically ( - 1≤ r ≤ 1 )

• The correlation coefficient is independent of

the change of origin & scale.
 Assumptions of
Pearson’s
Correlation Coefficient
• There is linear relationship between
two variables, i.e. when the two
variables are plotted on a scatter
diagram a straight line will be formed
by the points.
• Cause and effect relation exists
between different forces operating on
the item of the two variable series.
Advantages of Pearson’s
Coefficient

• It summarizes in one value, the

degree of correlation & direction
of correlation also.
Limitation of Pearson’s
Coefficient
• Always assume linear relationship
• Interpreting the value of r is
difficult.
• Value of Correlation Coefficient is
affected by the extreme values.
• Time consuming methods
 Spearman’s Rank Coefficient
of Correlation
• When statistical series in which the variables under
study are not capable of quantitative measurement
but can be arranged in serial order, in such situation
pearson’s correlation coefficient can not be used in
such case Spearman Rank correlation can be used.
• R = 1- (6 ∑D2 ) / N (N2 – 1)
• R = Rank correlation coefficient
• D = Difference of rank between paired item in two
series.
• N = Total number of observation.
 Interpretation of Rank
Correlation Coefficient (R)
• The value of rank correlation coefficient, R ranges
from -1 to +1
• If R = +1, then there is complete agreement in the
order of the ranks and the ranks are in the same
direction
• If R = -1, then there is complete agreement in the
order of the ranks and the ranks are in the opposite
direction
• If R = 0, then there is no correlation
 Rank Correlation Coefficient (R)
a) Problems where actual rank are given.
1) Calculate the difference ‘D’ of two Ranks i.e. (R1
– R2).
2) Square the difference & calculate the sum of
the difference i.e. ∑D2
3) Substitute the values obtained in the formula.
 Rank Correlation Coefficient
b) Problems where Ranks are not given :If the
ranks are not given, then we need to assign
ranks to the data series. The lowest value in the
series can be assigned rank 1 or the highest
value in the series can be assigned rank 1. We
need to follow the same scheme of ranking for
the other series.
Then calculate the rank correlation coefficient in
similar way as we do when the ranks are given.
 Rank Correlation Coefficient
(R)
• Equal Ranks or tie in Ranks: In such cases average ranks should
.
be assigned to each individual R = 1- (6 ∑D2 ) + AF / N (N2 – 1)

AF = 1/12(m13 – m1) + 1/12(m23 – m2) +…. 1/12(m23 –

m2)
m = The number of time an item is repeated
 Merits Spearman’s Rank
Correlation
• This method is simpler to understand and easier to
apply compared to karl pearson’s correlation
method.
• This method is useful where we can give the ranks
and not the actual data. (qualitative term)
• This method is to use where the initial data in the
form of ranks.
Limitation Spearman’s
Correlation
• Cannot be used for finding out correlation in a grouped
frequency distribution.
• This method should be applied where N exceeds 30.
Advantages of Correlation
studies
• Show the amount (strength) of relationship present
• Can be used to make predictions about the variables
under study.
• Can be used in many places, including natural
settings, libraries, etc.
• Easier to collect co relational data
 Regression Analysis
• Regression Analysis is a very powerful
tool in the field of statistical analysis
in predicting the value of one
variable, given the value of another
variable, when those variables are
related to each other.
 Regression Analysis
• Regression Analysis is mathematical measure of
average relationship between two or more
variables.

• Regression analysis is a statistical tool used in

prediction of value of unknown variable from
known variable.
 Advantages of Regression
Analysis
• Regression analysis provides estimates of values of
the dependent variables from the values of
independent variables.
• Regression analysis also helps to obtain a measure
of the error involved in using the regression line as
a basis for estimations .
• Regression analysis helps in obtaining a measure of
the degree of association or correlation that exists
between the two variable.
 Assumptions in Regression Analysis
• Existence of actual linear relationship.
• The regression analysis is used to estimate the values within the range for
which it is valid.
• The relationship between the dependent and independent variables
remains the same till the regression equation is calculated.
• The dependent variable takes any random value but the values of the
independent variables are fixed.
• In regression, we have only one dependant variable in our estimating
equation. However, we can use more than one independent variable.
 Regression line
• Regression line is the line which gives the best estimate of one variable
from the value of any other given variable.
• The regression line gives the average relationship between the two
variables in mathematical form.
• The Regression would have the following properties: a) ∑( Y – Yc ) = 0
and
b) ∑( Y – Yc )2 = Minimum
 Regression line
• For two variables X and Y, there are always two lines of regression –
• Regression line of X on Y : gives the best estimate for the value of X
for any specific given values of Y
• X=a+bY a = X - intercept
• b = Slope of the line
• X = Dependent variable
• Y = Independent variable
 Regression line
• For two variables X and Y, there are always two lines of regression –
• Regression line of Y on X : gives the best estimate for the value of Y for
any specific given values of X
• Y = a + bx a = Y - intercept
• b = Slope of the line
• Y = Dependent variable
• x= Independent variable
 The Explanation of Regression
Line
• In case of perfect correlation ( positive or negative ) the two line of
regression coincide.
• If the two R. line are far from each other then degree of correlation is
less, & vice versa.
• The mean values of X &Y can be obtained as the point of
intersection of the two regression line.
• The higher degree of correlation between the variables, the angle
between the lines is smaller & vice versa.
 Regression Equation / Line
& Method of Least Squares
• Regression Equation of y on x
Y = a + bx
In order to obtain the values of ‘a’ & ‘b’
∑y = na + b∑x
∑xy = a∑x + b∑x2
• Regression Equation of x on y
X = c + dy
In order to obtain the values of ‘c’ & ‘d’
∑x = nc + d∑y
∑xy = c∑y + d∑y2
 Regression Equation / Line when
Deviation taken from Arithmetic
Mean
• Regression Equation of y on x:
Y = a + bx
In order to obtain the values of ‘a’ & ‘b’
a = Y – bX b = ∑xy / ∑x2
• Regression Equation of x on y:
X = c + dy
c = X – dY d = ∑xy / ∑y2
 Regression Equation / Line
when
Deviation taken from Arithmetic
Mean
• Regression Equation of y on x:
Y – Y = byx (X –X)
byx = ∑xy / ∑x2
byx = r (σy / σx )

• Regression Equation of x on y:

X – X = bxy (Y –Y)
bxy = ∑xy / ∑y2
bxy = r (σx / σy )
Properties of the Regression
Coefficients
• The coefficient of correlation is geometric mean of the two
regression coefficients. r = √ byx * bxy
• If byx is positive than bxy should also be positive & vice versa.
• If one regression coefficient is greater than one the other
must be less than one.
• The coefficient of correlation will have the same sign as
that our regression coefficient.
• Arithmetic mean of byx & bxy is equal to or greater than
coefficient of correlation. byx + bxy / 2 ≥ r
• Regression coefficient are independent of origin but not of
scale.
 Standard Error of Estimate.
• Standard Error of Estimate is the measure of variation around the computed
regression line.
• Standard error of estimate (SE) of Y measure the variability of the observed
values of Y around the regression line.
• Standard error of estimate gives us a measure about the line of regression.
of the scatter of the observations about the line of regression.
 Standard Error of Estimate.
• Standard Error of Estimate of Y on X is:
S.E. of Yon X (SExy) = √∑(Y – Ye )2 / n-2
Y = Observed value of y
Ye = Estimated values from the estimated equation that correspond
to each y value
e = The error term (Y – Ye)
n = Number of observation in sample.
• The convenient formula:
(SExy) = √∑Y2 _ a∑Y _ b∑YX / n – 2
X = Value of independent variable.
Y = Value of dependent variable.
a = Y intercept.
b = Slope of estimating equation.
n = Number of data points.
 Correlation analysis vs.
Regression analysis.
• Regression is the average relationship between two variables
• Correlation need not imply cause & effect relationship between the
variables understudy.- R A clearly indicate the cause and effect relation
ship between the variables.
• There may be non-sense correlation between two variables.- There is no
such thing like non-sense regression.
 What is regression?
• Fitting a line to the data using an equation in order to describe and predict
data
• Simple Regression
• Uses just 2 variables (X and Y)
• Other: Multiple Regression (one Y and many X’s)
• Linear Regression
• Fits data to a straight line
• Other: Curvilinear Regression (curved line)

We’re doing: Simple, Linear Regression

 From Geometry:
• Any line can be described by an equation
• For any point on a line for X, there will be a corresponding Y
• the equation for this is y = mx + b
• m is the slope, b is the Y-intercept (when X = 0)
• Slope = change in Y per unit change in X
• Y-intercept = where the line crosses the Y axis (when X = 0)
Regression equation
• Find a line that fits the data the best, = find a line that minimizes
the distance from all the data points to that line
• Regression Equation: Y(Y-hat) = bX + a
• Y(hat) is the predicted value of Y given a certain X
• b is the slope ^
• a is the y-intercept
 Regression Equation:
Y = .823X + -4.239
We can predict a Y score from an X by
plugging a value for X into the
equation and calculating Y
What would we expect a person to get on
quiz #4 if they got a 12.5 on quiz #3?

Y = .823(12.5) + -4.239 = 6.049

 Advantages of Correlation
studies
• Show the amount (strength) of relationship present
• Can be used to make predictions about the variables studied
• Can be used in many places, including natural settings, libraries, etc.
• Easier to collect correlational data