Correlation

The term correlation indicates the relationship between two such variables in which the change in value of one variable affects the value of the other variable

Correlation may be classified according to following criteria

The number of variable Degree of correlation The direction of change

When the change in one variable are accomplished by change in another variable in the same direction ,it is called as +ve correlation. If the change in one variable accomplished by change in another variable in opposite direction it is called as -ve correlation

The correlation coefficient lies between +/- 1

In case where the correlation coefficient is +/- 1 , the correlation is called perfect correlation In case where the correlation coefficient is reaching to +/- 1 ,then that is high degree imperfect correlation In case where the correlation coefficient is reaching to `0 ` from + ve or ve side of the number but not exactly zero , then it is low degree imperfect correlation

Methods of determining correlation i. Scatter diagram

ii. Karl pearson`s product moment coefficient iii. Spearman`s rank correlation coefficient

Scatter diagram
This is a graphical method for studying correlation. This method may not give us any mathematical relation between the two variables , it certainly helps us in visualizing the behaviour pattern of the two variables.

The pairs of values of X and Y are represented by a dot , plotted on a graph paper . The graph is called scatter diagram.

r =1

r=-1

0<r<1

-1 < r < 0

r=0

Draw a scatter diagram for the following data and comment on it.
X Y 15 5 20 15 33 23 25 15 25 20 35 28 36 30 40 40 18 10 22 15

Y
45 40 35 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50

On observation we can conclude that there is a positive correlation between X and Y

Karl pearson`s product moment coefficient The coefficient gives numerical measure of nature and extent of correlation. It is a pure number independent of the units of measurement of X and Y . It always lies between -1 & +1 . It is independent of change of origin and scale. It is defined as r = Cov ( x, y) /( S.D of X * S.D of Y)

The following data represents the time in weeks (X) and out put of units (Y) of a factory. Fine the coefficient of correlation and interpret it.
X Y 7 14 5 8 4 8 11 19 10 16 12 19 14 20 9 16

Find the S.D of X Find the S.D of Y Apply in the formula

The following data represents the time in weeks (X) and out put of units (Y) of a factory. Fine the coefficient of correlation and interpret it.
X Y 7 14 5 8 4 8 11 19 10 16 12 19 14 20 9 16

X-mean (x)

y-mean (y)

(X-mean (x)) *( y-mean (y))

2 X-mean (x) y-mean (y)

7 5 4 11 10 12 14 9 72 n=8 mean= 9

14 8 8 19 16 19 20 16 120 15

-2 -4 -5 2 1 3 5 0 0

-1 -7 -7 4 1 4 5 1 0

2 28 35 8 1 12 25 0 111

4 16 25 4 1 9 25 0 84

1 49 49 16 1 16 25 1 158

Find the S.D of X Find the S.D of Y Apply in the formula

2 X Y

XY

7 5 4 11 10 12 14 9 72

14 8 8 19 16 19 20 16 120

49 25 16 121 100 144 196 81 732

196 64 64 361 256 361 400 256 1958

98 40 32 209 160 228 280 144 1191

Substitute the values in the formula

Spearman`s rank correlation some times there are certain characteristics which are qualitative in nature and they cannot be measured numerically. We can rank the individual according to these characteristic in ascending or descending order, and these ranks provide the data to calculate spearman`s rank correlation coefficient which is derived from karl pearson`s coefficent. The formula for rank correlation coefficient is 6 d R = 12 2

where d represents difference between ranks i.e. d = R1 R2, (R1 & R2 are ranks assigned for characteristics ) & n = no of pairs of observations

n (n 1)

The values of X and Y can be ranked as first, second ,third and so on and then the formula can be applied

If two or more observations have the same value then common rank by considering the average can be given to all repeated values. A correction factor is to be added while calculating the rank correlation coefficient

C.F =

m ( m 1) 12

Where m is number of times a rank is repeated

So rank correlation coefficient is given by

2 6 ( d + C.F )

R =1 -

n (n 1)

Ten girls participate for a beauty pageant. Their rank for beauty and intelligence are as follows: (1,7),(2,9),(3,2),(4,10),(5,1),(6,4),(7,8),(8,5)(9,3),(10,6) Find their rank correlation coefficient.
Rank in beauty R1 1 2 3 4 5 6 7 8 9 10 Rank in d= intelligence R2 R1 R2 7 -6 9 -7 2 1 10 -6 1 4 4 2 8 -1 5 3 3 6 6 4 0 2 d 36 49 1 36 16 4 1 9 36 16 204

n =10 Apply the values in the formula R =12 6 d 2

n (n 1)

Find the spearman`s rank correlation coefficient for the following data
exports( in lacks Rs.) local sales (in lakhs of Rs.) x y 12 25 15 21 13 15 20 18 15 20 14 17 19 20 13 16 21 20 18 22

Let R1 , R2 be the ranks assigned to X & Y . Say for R1 (x) : assign 1 to the highest value i.e. 21 and 2,3, & 4 to values 20,19, & 18 respectively . The next value 15 is repeated twice , and the ranks are (5,6 )/2 i.e 5.5 to both repetitions . Like this the last value 12 is given rank 10 Do the ranking R2 for (Y)

X 12 15 13 20 15 14 19 13 21 18

Y 25 21 15 18 20 17 20 16 20 22

R1 10 5.5 8.5 2 5.5 7 3 8.5 1 4

R2 1 3 10 7 5 8 5 9 5 2

d= R1- R2 9 2.5 -1.5 -5 0.5 -1 -2 -0.5 -4 2

2 d 81 6.25 2.25 25 0.25 1 4 0.25 16 4 140

n = 10 C.F for R1 (
FOR RANK 5.5 & 8.5
BOTH REPEATED 2 TIMES

C.F for R2 ( FOR RANK 5

REPEATED 3 TIMES

Apply in the formula R = 12 6 ( d + C.F )

Total C.F

n (n 1)