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Correlation

Correlation studies the relationship between two or more variables, which can be positive, negative, or zero. Positive correlation indicates that both variables move in the same direction, while negative correlation shows they move in opposite directions, and zero correlation means no relationship exists. The correlation coefficient quantifies this relationship, and scatter diagrams visually represent the correlation between variables.

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7 views3 pages

Correlation

Correlation studies the relationship between two or more variables, which can be positive, negative, or zero. Positive correlation indicates that both variables move in the same direction, while negative correlation shows they move in opposite directions, and zero correlation means no relationship exists. The correlation coefficient quantifies this relationship, and scatter diagrams visually represent the correlation between variables.

Uploaded by

alexsutter49
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Correlation

Correlation is the study of relationship between two or more variables.


 Definition: If the change in one variable affects a change in the other variable, the two
variables are said to be correlated and the degree of associationship is known as correlation.
 Types of correlation:
a) Positive correlation: If the two variables deviate in the same direction, i.e., if the increase (or
decrease) in one variable results in a corresponding increase (or decrease) in the other variable,
correlation is said to be direct or positive.
Eg: (i) Heights and weights
(ii) Household income and expenditure
(iii) Amount of rainfall and yield of crops
(iv) Prices and supply of commodities

b) Negative correlation: If the two variables constantly deviate in the opposite direction i.e., if
increase (or decrease) in one variable results in corresponding decrease (or increase) in the other
variable, correlation is said to be inverse or negative.
Eg: (i) Volume and pressure of perfect gas
(ii) Sales of woolen garments and the day temperature
(iii) Yield of crop and plant infestation

c) No or Zero Correlation: If there is no relationship between the two variables such that the value
of one variable change and the other variable remain constant is called no or zero correlation.
Eg: their is no relationship between the amount of tea drunk and level of intelligence
Figures:
To measure the degree of linear associationship we shall introduce Karl Pearson’s correlation
coefficients and is given as,
Cov ( x, y )
rxy 
Sx . Sy

Where (x1, y1), (x2, y2), (x3, y3), ............., (xn, yn) are n pairs of observations and
1 n 1 n
(i) Cov (x, y) = 
n i 1
( xi  x) ( y i  y )   xi y i  x. y
n i 1

1 n 1 n
 ( xi  x) 2   xi2  x
2
(ii) S 2x 
n i 1 n i 1

1 n 1 n
 ( y i  y ) 2   y i2  y
2
(iii) S2y 
n i 1 n i 1
Properties:
(i) The correlation coefficient between any two variables is independent of change of origin and
scale in value but not in sign.
(ii) Correlation coefficient rxy lies between -1 and +1, i.e., -1 rxy  1.
(iii) Correlation coefficient between x and y is same as the correlation coefficient between y and x.
(iv) Being a ratio, correlation coefficient is a unit free measure.
Correlation coefficient measures the degree of linear associationship between two variables. But in
real life situation we hardly get any relationship which is linear, rather we come across with non-
linear type of relationships among the variables.
For example,
(i) if we apply varying doses of a particular fertilizer to a particular crop to examine it’s
relationship with yield, we assume that as we go on increasing dose of fertilizer the yield will
increase or decrease linearly. But our common experience says that the yield will increase initially as
we go on increasing dose of fertilizer, reaches to a maximum level and then decreases. It shows a
curvilinear relationship.
(ii) Nonlinear relationships, and often monotonic relationships, arise regularly when
comparing geometrical measurements of a single shape. For example, there is a
monotonic nonlinear relationship between the radius of a sphere and the volume of that
same sphere.

Scatter Diagram
To investigate whether there is any relation between the variables X and Y we use scatter diagram.
Let (x1, y1), (x2, y2)….(xn, yn) be ‘n’ pairs of observations. If the variables X and Y are plotted along
the X-axis and Y-axis respectively in the x-y plane of a graph sheet the resultant diagram of dots is
known as scatter diagram. From the scatter diagram we can say whether there is any correlation
between x and y and whether it is positive or negative or the correlation is linear or curvilinear.

If the plotted points show an upward trend of a straight line then we say that both the variables are
positively correlated.

When the plotted points show a downward trend of a straight line then we say that both the variables
are negatively correlated.

If the plotted points spread on whole of the graph sheet, then we say that both the variables are not
correlated.

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