Chapter 5:

Correlation Analysis

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 Introduction
• Correlation coefficients are used to measure the strength of the
relationship or association between two quantitative variables.

• The standard method (Pearson correlation) leads to a quantity

called r that can take on any value from -1 to +1

• This correlation coefficient, r, measures the degree of 'straight-

line' association between the values of two variables.
• Thus a value of +1.0 or -1.0 is obtained if all the points in a
scatter plot lie on a perfectly straight line.
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• Given data on two variables X and Y.

• If there is a close relationship between the two variables,

• then the points in the scatter plot will tend to bunch together
otherwise they will be scattered all around.

• If high values of X are accompanied by high values of Y and low

values of X with low values of Y, then the sum of products of the
two deviations will be positive hence r will be positive too.

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Example: Height and quadriceps muscle strength in 41 male alcoholics

Figure 1. Scatter diagram showing muscle strength and height for 41 male alcoholics
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• If you look at Figure 1, it is fairly easier to see that taller men
tend to be stronger than shorter men, or,
• looking at the other way round, that stronger men tend to be
taller than weaker men

• It is only a tendency, the tallest man is not the strongest and not
is the shortest man the weakest.
• Correlation enables us to measure how close this association is.

• The computation of the correlation coefficient is based on the

products of differences from the mean of the two variables.

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• To see how correlation works, we can draw two lines on the
scatter diagram,
– a horizontal line through the mean strength and
– a vertical line through the mean height, as shown in Figure 2.

• Because large heights tend to go with large strength and small

heights with small strength,
• there are more observations in the top right quadrant and the
bottom left quadrant than there are in the top left and bottom
right quadrants.

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Figure 2. Scatter diagram showing muscle strength and height for 41
male alcoholics, with lines through the mean height and mean strength
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• When we add the products for all subjects, the sum will be positive,
because there are more positive products than negative ones.

• Further, subjects with very large values for both height and
strength, or very small values for both, will have large positive
products.

 So the stronger the relationship is, the bigger the sum of products
will be.

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• If the sum of products is positive, we say that there is a positive
correlation between the variables

• If the sum of products is negative, we say that there is a negative

correlation between the variables

• The sum of products will depend on the number of observations

and the units in which they are measured.

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If we have two variables X and Y with values xi and yi for the ith
individual, the correlation between them denoted by r(X,Y) is
given by:

 (Xi  X)(Yi  Y)  XY  [ X  Y ] / n
r 
 (Xi  X)  (Yi  Y)
2 2
[ X 2  ( X ) 2 / n][ Y 2  ( Y ) 2 / n]

The equation is clearly symmetrical as it does not matter which

variable is X and which is Y.

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Example 1: The correlation coefficient for the muscle strength(y)
and height(x) will be:

Σx2= 1,196,828
∑X = 7,000
∑Y = 13,207
Σy2= 4,757,609
Σxy= 2,267,142
n=41
r = 0.42
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 The size of the correlation coefficient clearly reflects the degree
of closeness to a straight line on the scatter diagram.

• The correlation coefficient is less than 1.0. r will not equal –1.0 or
+1.00 when there is a perfect relationship unless the points lie on
a straight line.

 Correlation measures closeness to a linear relationship, not to

any perfect relationship.

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Figure 3. Scatter diagram showing simulated data from a population where
there is a perfect relationship between the variables and yet the population
correlation coefficient is less than one

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Example 2: Figure 4. Scatter diagram showing muscle strength(y) and
age(x) for 41 male alcoholics

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Figure 5. Scatter diagram showing muscle strength and age for 41
male alcoholics, with lines through the mean
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Example: The correlation coefficient for the muscle strength(y)
and Age(x) will be:

Σx2= 82,845,
∑X = 1,785
∑Y = 13207
Σy2= 4757609,
Σxy= 553,800
n=41

r = -0.42

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 Inference on Correlation Coefficient

r=0 r<0

b=0 b<0
Y

Y
X
X

r>0

b>0
Y

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Hypothesis testing on correlation coefficient

Under the null hypothesis that there is no association in the

population (=0), the appropriate test statistics is given by:
n2
r
1 r 2

has a t-distribution with n-2 degrees of freedom.

Example: for the muscle-height data:

n2 41  2
t  r  0.42   2.89
1 r 1  (0.42)
2 2

P < 0.01
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 Interpretation of correlation coefficient
• Correlation coefficients lie within the range -1 to +1, with the mid-
point of zero indicating no linear association between the two
variables or the two variables are statistically independent

• A very small correlation does not necessarily indicate that two

variables are not associated, however.

• To be sure of this we should study a plot of the data, because it is

possible that the two variables display a non-linear relationship
(for example cyclical or curved).
• In such cases r will underestimate the association, as it is a
measure of linear association alone.
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