DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : B.VIJAYA KUMAR
Designation : Lecturer
Branch : Commercial & Computer Practice
(CCP)
Institute : GPW/Guntur
Year/Sem : II Yr Sem 4
Subject : QUANTITATIVE TECHNIQUES-II
Sub-Code : CCP-403
Topic : CORRELATION ANALYSIS
Duration : 50 minutes
Sub Topic : TYPES OF CORRELATION
Teaching Aids : PPT, ANIMATION

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Objectives

On completion of this period you would be

able to:

 Understand the TYPES OF CORRELATION

CCP403.3 2
Recap

In the previous class, you learnt:

 MERITS and DEMERITS OF CORRELATION

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 Types Of Correlation

POSITIVE SIMPLE PARTIAL LINEAR LOGICAL

CORRELATI CORRELATI CORRELAT CORRELATI CORRELAT
ON ON ION ON ION
NEGATIVE MULTIPLE TOTAL NON-LINEAR ILLOGICAL
CORRELATI CORRELATI CORRELAT CORRELATI CORRELAT
ON ON ION ON ION

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1. Positive Correlation

 TWO Variables (Eg: A and B) MOVE in the SAME

direction

 If one variable (Eg: A) INCREASES, other (Eg: B)

also INCREASES and vice versa

 Eg: Price and Supply of a commodity

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Table1. Positive Correlation

Price 50 60 70 80 90
Rs.
Supply 100 120 140 160 180
Kg.

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Explanation to Table1

 If PRICE of a product INCREASES,

its SUPPLY also INCREASES
and vice versa

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Graph:1
Picture courtesy: “Statistical Methods” by SP Gupta

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2. Negative Correlation

 TWO Variables (Eg: A and B) MOVE in the

OPPOSITIVE direction

 If one variable (Eg: A) INCREASES, other

variable (Eg: B) DECREASES and vice versa

 Also called INVERSE Correlation

 Eg: Price and Demand of a commodity

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Table2. Negative Correlation

PRICE 50 60 70 80 90
Rs.
Demand 180 160 140 120 100
Kg.

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Explanation to Table 2
Negative Correlation

 If PRICE of a product INCREASES,

its DEMAND FALLS
and vice versa

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Graph:2 Picture courtesy: “Statistical Methods” by SP Gupta

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3. Simple Correlation

 Study of relation between TWO VARIABLES only

Eg: (a) height and weight

(b) price and demand
(c ) income and consumption

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4. Multiple Correlation

 Study of MORE THAN TWO variables

 Relationship between ONE variable and ALL
OTHER variables together is considered

Eg: 1) yield of crop and rainfall, fertilizers used etc.,

2) sales and price, advertisement of a good,
expenditures etc.,

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5. Partial Correlation

 Study of MORE THAN TWO variables

 Relation between TWO considered
 Assuming OTHER variables CONSTANT
 Extension of Multiple Correlation
 Eg: rxy.z rxz.y ryz.x

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6. Total Correlation

 CORRELATION between variables TAKEN AT

A TIME and WORKED OUT
 If two variables are varying in the same
direction, it is POSITIVE Correlation
 Else, it is NEGATIVE Correlation
 Should be between + or - 1

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7. Linear Correlation

 Relation between TWO variables

 For 1 unit change in ‘x’, there should be CONSTANT
change in other variable
 Table 3:

X 1 2 3 4 5
Y 2 4 6 8 10

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Linear Correlation

 Explanation for Table 3:

 For 1 unit change in Value of ‘x’
 There is constant change (i.e. 2) in value of ‘y’
 Equation: y = a + bX

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Graph:3
Picture courtesy: “Statistical Methods” by SP Gupta

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8. Non-linear Correlation

 Also called CURVI-LINEAR correlation

 Relation between TWO variables
 For 1 unit change in variable ‘x’
 Other variables change at DIFFERENT RATE

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Graph:4
Picture courtesy: “Statistical Methods” by SP Gupta

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9. Logical Correlation

 Functional Relation between TWO variables

 Mathematically well-defined
 Logically sound
 Eg: (a) income and expenditure
(b) price and demand
(c) age and playing habits

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10. Illogical Correlation

 Also called Non-sense/Spurious Correlation

 Relations mathematically well-defined
 FAILS in LOGICAL TEST
 Eg: (a) rainfall and babies born
(b) cycles production and death rate

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Summary

Types of Correlation:
 Positive and Negative/Inverse Correlation
 Simple and Multiple Correlation
 Partial and Total Correlation
 Linear and Non-Linear Correlation
 Logical and Illogical/Non-sense/Spurious
Correlation
 Correlation value should be +/- 1

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Quiz:

1) If variables move in opposite direction, it is

a) Negative correlation
b) Positive correlation
c) both
d) None of the above

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Quiz:

2) Which type of correlation establishes functional

relationship between two variables?

(a) Non-sense correlation

(b) Curvi -linear correlation
(c) Logical correlation
(d) None of the above

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Frequently Asked Questions:

1. List out the types of Correlation.

2. Briefly explain Linear Correlation
3. Write about Logical Correlation.

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