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Correlation

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30 views21 pages

Correlation

Practice Questions

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tarekav697
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1 CONCEPT AND DEFINITION OF CORRELATION jal methods so far studied in this book focus on the js of one yariable or one statistical series only. In real life gvever, two or MOTE than two statistical series may be found to semutually related. For instance, change in price leads to change a quantity demanded. Increase in supply of money causes zerease in price level. Increase in level of employment results in “acrease in output. Such situations necessitate simultaneous study «ftwo or more statistical series, The focus of study in such snations is on the degree_of relationship between different ‘sical series. The statistical technique that studies the degree cfsuch relationships is called the technique of correlation. Definition ‘ccording to Croxton and Cowden, “When the relationship is of « Saniitative nature, the appropriate statistical tool for discovering and vouring the relationship and expressing it in a brief formula is known “correlation.” In the w "the words of Boddington, “Whenever some definite connection 1, tween the two or more groups, classes or serves OF data there is said “le correlation,” > Relationship between Two Variables may just be isa cee” find a relationship between two variables which st coe Parture of m tuary, you may fi Country ligratory birds from a sanc! / «tt Such relationships are meaningless. These are other words, See clusion. Such hips are not Or f any meanin ision. Such relationships hy those re ingful conch sans ‘fer some meaning is a relationship thal aningful relat ye of marks in mat! Cieieccncned | mathiod dierent va between pn demand a Coincidence idence. Example ind a fall in wedding cereme! spurious relat to be treated as when there snies in the which ionshi ful conclusions. jonship; Good hnematics: an 265 Positive and Negative Correlation a-tinear Correlation Correlation between differen varahy., 908 NOT neat oF non-linear. esse Here a brie design a Sle on 8) 0) Positive Correlation " i caret? ina constant pro, i then tw are mein the samedi gy, iSeaaieteo cool dan tne tl cicada, armed Fier on SP FC a cn peg elation isclled pon Seats | ip Mi gragught ine, Thus. ner cncaug n 2 Seen Be = > example. Check the following table ma ‘ute 8 an illustration a, i lation ‘Table 1. Positive Correlation between the yng ine if inaey consantproption, = nde aid wo be non-linear Such arcing ee weep ac Beno re es ste sai. Linear Correlation Saar Sameer nae ne ry ery change in variable (a) by 2 units thereisach rs orev irae (b) by 5 units. Non-linear Correlation ra 6 s [uel ‘ugh both tend to change in the same direction. Thats, both ‘ineresing, but not in any constant proportion (2) Negative Correiation (When wovarableschangein diferent irecions tsa oy correlation. Relationship between price and degen eae asan example. The following table demonsiratcr i ene ‘Table 2. Negative Correlation between the Vrahe [oS cSnk SSeS eee Smple and Multiple Correlation Sipe Cotelation ‘imple correlation implies the study of relationship berween 2 Bales only. 1 beeen price and demand. woemoni het does comeaton eau? aoa | SRL the relationship rade eae {end to beleve that corlation svagest a relations between 6 ip between money su aes other Example: Ths 1s cor vanes, | Mtb Conelation omen! 5a decrease io quart ones, meee ‘olty Cleary an increase n price causes 8 verre Nh three variables eau nt? Soames aon er B20 oy pea, | eaten among or more hen Ne Saco recaronshp between he arate 3 en 2 eh egaegulaneousty iis called mulip dependent conan. Of Sag ton, the entire set of independent and depen any cause and eff oF vale i oF ira tee J gt aneously. studied. For isc, eS ve good novaceics maybe 220M OTa ete Yeh Mare ater me on er etre Prod Is who are good in academics. ooee 0 cH “Haneously studied, coer 961 2, DEGREE OF CORRELATION canbe te Following depees ea ee ¢ OF ESTIMATING CORRELATION re available fOr estimating correlation betyeey 5 ate acres, Some of the importan, (<0 ical portant ones are == ites 4 Lol Correlation sa aumercal oe (1) Perfect Correlation: When in peepee = When to variables o 7 sees proportio ct correla age ef mv Method, Dandie ooer ae ou 987 gered DnB ticient of Correlation, and mmovraes ne &) Perect Positive: Correlation is ere mB 0 pearonts OP i ee Presence of excelason proportional change int ey posi gon AE unk Correlation Cocllicien Ghouldnotbs en 20 8 0 variables i, este uy alls Should not beaten di Inv this case, coefficient of O but < 1). The degice of crting ‘eicencasuscaty | between Oand | may be rated as ‘GreatanGeaween (i) High: When correlation of two series is close to one it eine called high degree of correlation. Its coefcient es hs ose nro cers re 0.75 and 1 wroguanence (Gi) Moderate: When correlation of two series is nether ie Tracoveuton ers nor small, itis called moderate degree of coreaion. Is ena coefficient lies between 0.25 and 0.75. Low: When the degree of correlation of two series is it jon, Its coef! min elf small, itis called low degree of correlation. Is mrowiesgeponavvnats lies between 0 and 0.25. . ae anoana All these degrees of correlations may be postive 0 "" extrsne can be Degree of Correlation Graph: Seattered Diagram lids aE Srowsup auess matte poouswersotpavens” Gj ‘Source haps. sccce | a tegen? eet a See igh [Weiecer FO 7H a iota nce [etme as od care ee eee BGB stones lor feonomics Merits and Demerts of Scatered Dg case af mite PsN cme bee ‘ram isa oe caght line, his any straight Merits otc aE (0 Scattered diagram is a yen “ Ces it (i Justa glance a the diagram isan ofthe variables have ang re ore (iii) Scattered diagram also indicates w positive or negaiee Es bets aohp between X and Y Urough steed dapag a aoa Se ; Demerits {) A scatered diagram dges nor meg tape, Dra cane rate ly edgy ay correlation, | e'” AR€S not measure the preci iy ald of SD kaon fe Je eationship (closeness) between pre nd quent sl fone enti 0) Ie gives only an approximate idea of the *elatio (id Teis nota quantitative measure of the relations CHuRDIS. Tis only a qualitative expressing the quanta’ person's Coefficient of Correlation change. ee anreiagam method of correlation merely incaey the th jmrim of correlation but not its precise magnitude, Kind lustation, dion o aw is geen ot quantitative method of calculating easeaton, 1 ead ond adel) toed lbed of Sing svn ot teeta ef coche parla The following table gives height and weight of the student a class. Make a scattered diagram to show if she relationsip postive or negative and if the relationship is strong os nea RMU ‘eudingo Karl Pearson's method, the coellicient of correlation sonsured as 180 [50 Tiss [ies [ts [am [ie ps [ss [5 [os | | Loto Solution: ee, “SCATTERED DIAGRAM Coefficient of correlation. 4 skLX -) YY. ~K = Standard deviation of X series. *: = Standard deviation of ¥ series N= Nuraber of ob . Ney of observation: eee “ed gut applied only to those series where de not appl Aairasasnctc " From actual average of the series, it toes tage the basis o ‘ei mats Where deviations are calculated on eaiulated Seams nesta ale of the coefficient heey ele tees neti formula may vary bet Sfyare rather "“Generutt@ations, when r= +1, or Mh. value of" varies between +1 and is pose shows that there & Pte Aglance at the above diagram shows that Mer Ie relationship between height and weight of I Tj wri dots are moving upward in a particu It shows that with the increase inh A Modified Version of Kat! Pearson's F ‘ormu In it there is no need to calculate st _ “Y”. Coefficient of correlation the following formula: ee Here, x = Ry =v Iusteation. Calculate coefficient of correlation, + BIEN the following dy aera lata = a Ey Deviation: xX) =a 5 Pty The table shows that, Exy = 58, Ex* = 28, Ly’ = 130. ation ist het oe 1 eqafient oF OFFLION between the age eT am ) cemen Ty rene) re Cir esi B % ® af 26 | oye et yy = 191, Bx? = 208, By? = 178 Ixy EP Ey? 191 (208x178 191 191 998 192.42 Substituting the values, we get thew of ay en Corretation (2) = 0.993 58 58 88, = 40.96 ihe ; J8130 ~ 73,640 — 60.33 otha igh degree of positive correlation between the : : wife, Coefficient of Correlation (1) = 40.96 Iisa situation of sh positive correlat 372 Stoistcs for Econcrmis soo 18 7 Short-cut Method This method is used when mean y nn ralue ion ae Pa but in fractions. In this method, devises NU Whoye pec Reta the assumed mean of both the serie Wine yeu , es steps volves 2 ie : Fos (i) Any convenient value in X and ¥ seri 2 mean Ax and Ay. eS stem a (i) Wi he hep of assumed mea obo ih = at of the values of individual variabl if StHes dey Bax = 215, (¥ — Ay) are calculated, “te OC ae (ab 2 cone d x) x (Bd Gi) Sx andl Edy are found by adling the devitio eae i (iv) Deviations of the two series are multiplied. sy 2 ee ‘multiples added up to obtain Sandy andy Ga? dye ai dy he Edx xf ay? (©) Squares of the deviations dx? and dy? are out Edx" and Edy", added up wf (vi) Finally, coefficient of correlation is calcula following formula: FORMULA - (Zax xZay) Edady » Ee » dy y Eds? xy Bayt Deviation of X series from the assumed mean = (X-A. (ay Deviation of ¥ series from the assumed mean = Zdxdy = Sum of the multiple of dx and dy. dx’ = Sum of square of dx. Edy" = Sum of square of dy. Bdx = Sum of deviation of X series. Zdy = Sum of deviation of ¥ series. N = Total number of Ilustration, . lal wee rice and at Jation between the P Ee Calculate coefficient of corr suppl a ee 6 10 15 fed using the Nasxio) oe 3) 213- 5 eee 205E | bal = ais — 33.80 x x a % 205 ~ ¥79.20 x 250 _205__ ~ 311.70 = +097 Uncen of Correlation (r) = + 0.97. ‘Tsisasiuation of a high degree of positive correlation aT Ss-devation Method “enethod involves the following steps: ‘ep Step-1 and Step-2 of the short-cut method "Now Si rie ‘dy’ some common factor ~ a ere Cs yn factor ioe ores Gays Cy here C; is commer ae is ind cs s common factor for series ¥. And dx’ and iy ition, ay ms ty Edy’ are found by adding the deviatio ations of x yal nd She mayo the two series are multiplied, 3s x “Nples added up to obtain Eds’ dy’ a 15 20 (9) Squares of the deviations dg’? out Sdx"? and Day" (vi) Finally, coefficient following formula: FORMULA h Mustration, Calculate coefficient of correl Gatesiate tom beeen th Pricey ey 3 im Bay 30 35 0 [Ty Solution: = ere Cale 0 ar “1 “ Biv) Bax™ = 10 Day’ (Zdx’) x Edy’) Zdx'dy’= W = So a N a o 10-2 x =10 * Tid x Vi0~ Coefficient of Correlation (r “This is a situation of a perfectly new price and quantity demanded. i correlation Coefficient of Fite ig, Weis @ PUTE mumber 1, pep, 1s 9k pats of nits of Agate ye oF INGEN Aver en agi, {reine wo variables move in the same die gore the WY riables are uncorrelated Tha os eo are unc here non ect feren tem HOWENEE er Ypet i A i eve 1 the correlation is perfect on eee Proportionate 2100 Fe indicates strong linear r pf ejpradoe ofniates strong linear relations he of the correlation coefficient tes be ween Hye al je,-1 S054 Lif a as OnE, Le - the vale ofr coe and it indicates error in calculation, : Piet foedie aad ented Pe re ae ct i el Po fpamiea? 2 | 8 | 2 [a] = pw late few [18 | 20 [= | wo |e] wpe tw (Ans. = +0994) ait Karl Pearson's coefficient of corelation, between the age and weigh of cl, cc) 7 2 3 7 3 (Weigh Og) 3 4 6 7 0 (r= +08) oe coefficient of correlation, using Karl Pearson's formals based on actual msn of ss gen belo Year None teens | wpceaas | Seat 2015 00 13 2016 se ws 2017 lot Mo 2018 i. mo | 2019 os. S | 2020 : Roa 103 2022 4 ‘Spearman's Rank Correlation Coettici In 1904, Charles Edward §; ea calculate coeMicient ol Tea develo Fe are some aration oA oat terms, Their relative merit can be levered ot 3 order of preference or ranking, For mano basi of preference. Similariy, the selection commana. eit ode intact ean rrp el fae su ane in our day-to-day life, experi tn Ce tH Seam Rk, FORMULA 38 qualitative ek ea, bravery, able, sn Here, D = Rank differences, N= Number of pairs. We shall study the calculation of rank correlation in tree different situations: (i) When Ranks are given; Gi) When Ranks are not given: (iii) When the values of the series are tl 0.6. ion (ny) xs nguive coecient of rank corcation 1 the ns “o shichis fairly high. High negative correlation suggess and xf judgements are fairly opposite vo each thet he same, lation of Rank Correlation Following illustration ex| Jains the calcul: 8 p {ct Rank Coreation when Ranks ae not =n Coefficient of Rank Correlation when Ranks are given saat’ only data are given and not the ranks, In such vad me are to be accorded by the: student himsell ee maa ce tiniest ANks, uniform procedure should adopted two judges accord ‘hms For example, if the highest rank is acordel 0 SOfSale inne series, the sae must be done SS In a fancy-dress competition, ranks to the 10 participants: ties as well, a lustration. {na Poetry Recitation Competition (loving marks by two dere ee is EL ie : 1 Calculate the coefficient of rank corvelau a n Solution: There are 10 items each in th may accord, the highest rank, ie, series, ie., 18 in series X and 15 in rank, i, Ito the lowest value X and 2 in series Y. sei pay Xand 1e two seri ies in this 10 to highest valu Y,and ftem in each seri Ns wey Tera uestion tem Accord the a 1. Me Le Vinge ation when Ranks are Equal corel Rar" more items iN hE SETICS have gaat 0 Fe of the tWO rams (say 7 Sap Sh ae eee ey 78 f the ach valu me i ikely n order to avoid qh, « gg formula is used for the Jation in such situations ollowint fink correl 3 1 ind np = m4) + Fy (: mm) 4.) Nv- N nber of items of equal ranks, quer of inems OT GS cient of rank correlation between the matks in ics, as indicated by 8 answer books ofeach 2s 2 2 i 0 5 6 18 im] ra fue ae 8 answer books each in Economics and Satis sing diferent marks. Rank 1 is accorded to the highest cre sa two answer books indicate 10-marks each, Hence, the sr bok has been given Rank 8 and the second 7. Thus the srgeank = 847 = 7.5 has been accorded to both. Likewise,in 6ED* NU-N 6x86 (10)? =10 0.48 Coetfcient of Rank Correlation (7) = 048. | ‘Thus, there is a positive rank correlation of 0.48. ‘a moderate Jee conis vo answer books indicate 12 marks each, The average at=°45 = 5.5 has, therefore, been accorded to both Calculation of Coefficient of Rank Correlation en es = 1-136 =_0.36 oeflcent of Rank Correlation (r,) 0.36. Merits end Demerts of Rank Correlation Merits ©) Spearman's rank cory ‘method of correlatio relation method is easier than Pearson's TY convenient method when he series give ony ference and not the actual (i) Rank correlation ig a uPerior method of analysis in case ei ualtative distribuig MS stich as those relating to vi wisdom oF igor Demerits ire, ance: © Rank correlation case of group equency distr a © Ian handle onty pony a limited umber of obs¢ SERRE nar ge F exceeds 29,1 WEE When the number method cannot be used ions, s. Ibs of observation py doing BI esined fillowing rans nthe nahenag ad tin Ee cleat oat related in thee tet Be ra pee ge PER EER nt ofrank corto, si ef catia comin of nin aie the fo , ng dataset 20 i ears 65 3 6 es 26 35 8 IMPORTANCE OR SIGNIFICANCE k OF CORRELATION lowing observations Bighlight the importance ot sgsican’s stcorrlation asa statistieal mother “oncepts in economic theory, the concept of elasticity of des @) Cause and Effect Relati sometimes su such as, the law of demand and ‘mand, # Correlation analysis facilitates business decisions because the trend ath of one variable may Suggest the expected changes in the other, Accordingly, the businessman, may plan his business decisions for the future, a) Policy Formulation: Correlation analysis also helps policy 5 RUTaOR. TT THE Government finds 2 negative — between fax rate and tax collection, it should pursue: Policy of low tax rate Because, low tax rate would lead to "gh tax collection to bec OY Fa cg L F Miscellaneous Ilustrationg snustraton 1. From the following data, compute the Coefficient of between X and Y series: Reema Po ec ica seo coors aeomee ‘summation of product of deviations of X and Ys, i Cries fro respective arithmetic mean = 41 hey Solution: Weare given: i 350, Y= 138, Ex? = 19, Ey? = 94, Exy = 4) Zxy VENXE Substituting the values, we get 4 41 eee alae i "* Vloxo4 ~ 7,786 ~ 42.267 Coefficient of Correlation (r) = + 0.97, AMustration 2. From the following table, calculate the coefficient of correlation by Karl Pearson’s method: 6 2 10 4 9 im 7 8 Arithmetic means of X and Y series are 6 and 8 respectively. Solution: ‘et us first find the missing value of ¥ and let us denote tb} ZY _Q+ll+at+8+7 _ 3540 find the coefficient of correlation som ©" Calculation of Coefficient of Correlation aa Serer Se aane c ooo °° eexdye ‘The table shows that Exy = ~ 26, Ix" substituting the values, we get ee) * Ya0%30 -26 _ -26 © {800 ~ 28.28 =~ 0.92 Coefficient of Correlation (r) = - 0.92. stration 3, From the data given below, find the number of items (N}: 1505, Exy =120, Standard Deviation of ¥(o,)= 8, Ex'= 90 where, x and y are deviations from arithmetic mean. Soltion: Given: r = 0.5, Exy = 120, Ex? = 90,6, = when y = YY (Formula of Standard Deviation) both sides, we get squrrns bv “ . Xow re = ase 7 LOUNGIN Squaring both sides UI 20y DON GIN, Lane - 5740S Las. T6UN = 10H L440) N = 14cn N= = a means are not whole numbers, we take 16 ag he ac the fan for X and 42 as assumed mean for ¥. gc the a 97.882 x Ey? = 2116 Ey = 76.03 Value of Ey? = 76.03, Imustration 6. Two ladies were asked to rank 10 different types 1 ell Bong ‘The ranks given by them are given below, aT oT epee Tr pepy ifets Tots tops Cheb a et ty Caleulate Spearman’s rank correlation coefficient, Solution: Caleulation of Rank Correlation Coefficient Rank Pa Here, N = 10; ED? = 199 Substituting the values, we get 6x10 “10°10 _ 600 1,000-10 600 ~ 990 = 1-0.606 = 0.394 jent of Rank Correlation (%,) = 9.394 oelic 7. ee ent of correlation by me culate coeicient of correation by means of ranking metho, ae ee following data 60 | oo 0 [a Te 160 [170 [130 a0 | so_[ 120, Solation: Calculation of Rank Correlation Coefficient 225 wets [=o fern In this question in X series, the values 60 and 50 ate repeated Oi afd te Te i as eet £5 *8) wile forthe value 50 iti. (6 +7 #2) In both the ses, the correlation factor will be 75(9"=3) and y@—2 "spectively. In series ¥, the 190 is repeated twice. The average Tank forthe value 190 is 5.5 (5 + 6 + 2) In this ase correlation factor will be $ (2-2), Lin? jpimi-™) Loa of=pt+ qpimn-m) +7giot-mt coroner 989 gf Fd digitalis ai oT yale @-8 TI = 84 oso 97.16 = ent oF Conrenation ( oa one beoye : ofas+ heo+pO+796)| Po sie Sid-8 a oe ,. jon gicient of correlation from 6 4s+2+4+5) wre concent OF lation from the following data 504 0.871 = 0429 Coefcient of Rank Correlation (n,) = 0 iusrtion 8 Calculate the coefficient of correlation using Kar 1 Karl Pearson, formula of the series given below: Calculation of Coefficient of Correlation (0.0625)(450)N- 1,025, > (28.125)N = 2,025 = 2,025 28.125 Number of ftems. tMustation 13. ‘The ranks of 8 same students in tests i were as follows: Mathematics an t[2 [3 at2[e fess Calculate the coelficient of rank correlation, Solution: Rank ca ee Statistics ao (Ry) i? = 40 28:50 e alues. we get 1 ng the ne He ssi = DAS = 052 gent of Rank Correlation (4) = 052 reflcient 0 © nit sation ; oat tite coefficient of rank correlation betweew X and ¥ sein series ¥. ed ti Here numbers 30, 50 and 70 are repeated Therefore, m Gf19.5-40.5 40.5 40.5] 504 620 126 = nod 1 504 1-0.25 = 0.75 Coellicient of Rank Gor relation (ry) = 0.75 Mlustration 15. The rank correlation coefficient between marks obtained py 10 students in English and Statistics was found to be 0.5. Find the sum of squares of difference of ranks. Solution: Given: r = 0.5, N = 10 Now, | onde N°-N 6ED? N°-N GED? 10°10 os 1,000-10 = expt _ 900° 7 03 . 6ED? = 0.5 x 990 = 6zD? = 495 > zp? = 495 6 2 ID? = 82.5 Sum of Squares of Difference of Ranks = 82 396 Statistics for Economics Essential Practicals + ? 1. Make a scattered diagram of the data given below, Does any relationship exist between the two BS 4 5 6 U 8 9 10 IL 12 13 | 14 | 2 Me 78 i 66 60 54 48 42 36 30 24 18 2. Calculate coefficient of aon of the age of a and wife using Karl Pearson’s = 3 5 3 Ls RCuICee ts) 27 | 28 30 31 33 35 - Wife (Age) 20 | 29 = 27 | 299 | 27 | 29 | 28 (Ans. r=+084 3. Calculate correlation of the following data using Karl Person’s method: T4150 a Ms {| 108 | ia [145 [150 [ 119 [ 125 = ial 190 | 214 | 187 | a70 [azo | 210 | 190 | | 08 (Ans. Ce {te , Bl 4. Using assumed average in Karl Pearson’s formula, calculate coefficient of correlation following data: él 78 89 | or 69 59 7a | 8% 125 | 137_[ 156 12 107 106_| 18g (ans. = 404 Statistics for Economics Y | 40 50 60, 10 70 | 80 | 90 | io I4 | 20 | 99 T 30 | idents of a class secured following marks in Economics and History, Calcul: (Ans. r= + 0.96) 6 son ‘with the help of these data, late coefficient of « 66 90 89 5B 58 “ a 38 76 65 58 53 my fe (Ans. r, = +0.79) « gndcut rank difference correlation of X and ¥, a2 80 \ 78 5 75 58 67 60 39 12 3 | 4 14 4 ie ie fi (Ans. ty == 0.714) 6, Calaulate coefficient of correlation of the following data with rank difference and Karl Pearson’s methods: Economies (Marks) 54 27 52 14 35 90 25 | 56 | 60 Tae iven cS} 58 60 46 50 40 35 56 | 44 | 42 8. Seven methods of teaching Economics in two ul correlation. (Ans, 1 =-0.703, r iniversities are shown below. Calculate rank difference = 0.69) Acces LenS aerate Lena Cen Give three examples of perfect correlation. Find out rank difference coefficient of correlation with the help of the following data 1 UL m1 IV Vv VI VIL 2 1 5 3 4 7 6 1 3 2 4 7 6 | (Ans. 4 = +0.5) 48 33 40 16 65 26 15 57 13 1B 22 6 4 20 9 6 15 ‘i (Ans. 1, = + 0.758) pula coefficient of correlation of the following data: 10 a 9 10 12 13 ul 9 a A a 9 i 13 8 Devi ton of two series X and Y are shown. Calculate coefficient of correlation. (ns. r= + 0.90) +5 | 4 [ -2 [+20 | -10 o | +8 oj 1 a +5 [mae | -7 | +25 | -10 | -3 oj] +2 | 8 1-% (ans. r= +089) 13. Ina baby competition, two judges accorded following ranks to 12 competitors. Find the cog of rank correlation. Gora aly dael Eas aad (ase. dtnd [ae

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