WHAT IS...

What is a Correlation Matrix?

by Tim Bock 

A correlation matrix is a table showing correlation coefficients between

variables. Each cell in the table shows the correlation between two
variables. A correlation matrix is used to summarize data, as an input into a
more advanced analysis, and as a diagnostic for advanced analyses.
Create your own correlation matrix
Key decisions to be made when creating a correlation matrix include:
choice of correlation statistic, coding of the variables, treatment of missing
data, and presentation.
An example of a correlation matrix
Typically, a correlation matrix is “square”, with the same variables shown in
the rows and columns. I've shown an example below. This shows
correlations between the stated importance of various things to people. The
line of 1.00s going from the top left to the bottom right is the main diagonal,
which shows that each variable always perfectly correlates with itself. This
 matrix is symmetrical, with the same correlation shown above the main
diagonal being a mirror image of those below the main diagonal.

Create your own correlation matrix

Applications of a correlation matrix
There are three broad reasons for computing a correlation matrix:

1. To summarize a large amount of data where the goal is to see

patterns. In our example above, the observable pattern is that all the
variables highly correlate with each other.

2. To input into other analyses. For example, people commonly use

correlation matrixes as inputs for exploratory factor analysis, confirmatory
factor analysis, structural equation models, and linear regression when
excluding missing values pairwise.

3. As a diagnostic when checking other analyses. For example, with

linear regression a high amount of correlations suggests that the linear
regression’s estimates will be unreliable.

Correlation statistic
Most correlation matrixes use Pearson’s Product-Moment Correlation (r). It
is also common to use Spearman’s Correlation and Kendall’s Tau-b.  Both
of these are non-parametric correlations and less susceptible to outliers
than r.
Coding of the variables
If you also have data from a survey, you'll need to decide how to code the
data before computing the correlations. For example, if respondents were
given choices of Strongly Disagree, Somewhat Disagree, Neither Agree nor
Disagree, Somewhat Agree, and Strongly Agree, you could assign codes of
1, 2, 3, 4, and 5, respectively (or, mathematically equivalent from the
 perspective of correlation, scores of -2, -1, 0, 1, and 2). However, other
codings are possible, such as -4, -1, 0, 1, 4. Changes in codings tend to
have little effect, except when extreme.

Treatment of missing values

The data that we use to compute correlations often contain missing values.
This can either be because we did not collect this data or don’t know the
responses. Various strategies exist for dealing with missing values when
computing correlation matrixes. A best practice is usually to use multiple
imputation. However, people more commonly use pairwise missing
values (sometimes known as partial correlations). This involves computing
correlation using all the non-missing data for the two variables.
Alternatively, some use listwise deletion, also known as case-wise deletion,
which only uses observations with no missing data.
Both pairwise and case-wise deletion assume that data is missing
completely at random. This is why multiple imputation is generally the
preferable option.
Presentation
When presenting a correlation matrix, you'll need to consider various
options including:

 Whether to show the whole matrix, as above or just the non-

redundant bits, as below (arguably the 1.00 values in the main diagonal
should also be removed).

 How to format the numbers (for example, best practice is to remove

the 0s prior to the decimal places and decimal-align the numbers, as
above, but this can be difficult to do in most software).

 Whether to show statistical significance (e.g., by color-coding cells

red).

 Whether to color-code the values according the correlation statistics

(as shown below).

 Rearranging the rows and columns to make patterns clearer.