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2 Methods of Studying Linear Correlation 1

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Subject : Business Statistics

Unit 1 : Linear Correlation


Topic : Scatter Diagram Method

Prepared by : Prof. Monti Daredi


Methods of Studying Linear Correlation :
1) Scatter Diagram Method
2) Karl Pearson’s Product Moment Method
3) Spearman’s rank Correlation Method

Scatter Diagram Method :


 This is a very simple method.
 From the two correlated variables denote one by x and other by y.
 N sample denoted by (x1,y1) , (x2,y2) , ….. ,(xn,yn).
 Taking values of variable x on X-axis and value of variable y on Y-axis.
 Represent all the points on graph paper with appropriate scale , we obtain diagram
which is known as scatter diagram.
x Y
10 = x1 25 = y1
20 = x2 35 = y2
30 = x3 45 = y3
1) Scatter diagram of perfect positive linear correlation:
 All the points lie exactly on a straight in an increasing order.

2) Scatter Diagram of Partial Positive Linear Correlation:


 All the points are not in one straight line but lie more or less around some
straight line in increasing order.

3) Scatter diagram of perfect negative linear correlation:


 All the points lie exactly on one straight line in an decreasing order.
4) Scatter diagram of partial negative linear correlation:
 All the points are not in one straight line but lie more or less around some
straight line in decreasing trend.

5) Scatter diagram of lack of linear correlation:


 If all the points are distributed randomly then it is known as scatter diagram
of lack of linear correlation.

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