Name of Institution

CORRELATION & REGRESSION

ANALYSIS

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 CORRELATION Name of Institution

• When the relationship is of quantitative nature, the appropriate

statistical tool for discovering and measuring the relationship and
expressing it in a brief formula is known as correlation.
• The measure of correlation called the coefficient of correlation
indicates the strength & direction of relationship between two
variables.
• The coefficient between two variables x and y is denoted by r or rxy
or ρ.
• It lies between – 1 to + 1.
• If r = 0, then the variables are said to be independent.

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 TYPES OF Name of Institution

CORRELATION
I) Based on Direction:--
Positive Correlation: When increase/decrease in the value of one
variable results in a corresponding increase/ decrease in the
value of other variable.
Negative Correlation: When increase/ decrease in the value of
one variable results in a corresponding decrease/ increase in the
value of other variable.

II) Based on Degree:--

High
Moderate
Low

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 METHODS OF Name of Institution

STUDYING CORRELATION
1) Scatter Diagram Method.
2) Karl Pearson’s Coefficient of Correlation.
3) Spearman’s Rank Correlation Coefficient.

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 SCATTER DIAGRAM Name of Institution

• The simplest method for studying correlation in two variables is a

special type of dot chart called Dotogram or Scatter Diagram.
• In this method given data are plotted in the form of dots, for each
pair of X and Y.
• The more the plotted points scatter over the chart, the lesser is the
degree of relationship between two variables.
• The more nearly the points come to the line, the higher the degree of
relationship.

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 Name of Institution
Y Y
r = -1 r=0
Perfect negative No Correlation
Correlation

X
X

Y
r=1 Y
r=0

No Correlation
Perfect Positive
Correlation

X X
 Name of Institution

Advantages:

1. It is readily comprehensive and enables us to form a rough idea of the

nature of relationship between the two variables x and y.
2. It is not affected by extreme observations.

Disadvantages:

1. It is not a suitable method if the number of observations is fairly large.

2. It is only a rough measure of correlation where the exact magnitude
cannot be known.

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KARL PEARSON COEFFICIENT OF Name of Institution

CORRELATION
• Also known as Pearsonian Coefficient of Correlation.
• It describes the degree & direction of relationship between two
variables X and Y.
• It is denoted by the symbol ‘r’.
• The value of Pearson’s coefficient of correlation lies between -1 to
+1.
• If X and Y are independent variables then coefficient of correlation
is zero.

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 PEARSON FORMULA Name of Institution

• Correlation coefficient is denoted by r given by the formula:-

First form
Cov.( x, y ) Cov.( x, y )
r 
var x  var y  x  y
Second form

r
 ( x  x)( y  y )
 ( x  x)  ( y  y )
2 2

Third form
( x  y )
 xy  n
or r 

  x 2

  y  2


 x   y 
2 2



n 

n 

 Name of Institution

Ques 1. Calculate Karl Pearson coefficient of correlation.

X Y
12 14
9 8
8 6
10 9
11 11
13 12
7 3

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 Name of Institution

Ques 2. A financial analyst wanted to find out whether inventory turnover

influences any company’s earnings per share.Random sample of 7 companies
listed in stock exchange were selected and the following data was recorded for
each.Find the correlation coefficient.

Company Inventory Earnings

turnover per share
(%)
A 4 11
B 5 9
C 7 13
D 8 7
E 6 13
F 3 8
G 5 8

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 Name of Institution

Ques 3. The following table gives the indices of industrial production and number
of registered unemployed people (in lakhs). Calculate Karl Pearson’s coefficient
of correlation.
Index of No. of
production unemployed
100 15
102 12
104 13
107 11
105 12
112 12
103 19
99 26

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 SPEARMAN CORRELATION Name of Institution

• Rank X and Y separately.

• The largest value gets rank 1 and the second
largest 2 and so on.
• Formula is:-
6* d 2
r  1 ; where d  Rank X  Rank Y
n(n  1)
2

• For tied ranks:-

 1 1 
6 *  d  (m1  m1 )  (m2  m2 )  .......
2 3 3

r  1  12 12 
n(n 2  1)
Here m is the number of times a value is repeated .
 Name of Institution
Question1) Calculate the coefficient of correlation for the following heights in
inches of fathers(X) and sons(Y).

X Y
65 67
66 68
67 65
67 68
68 72
69 72
70 69
72 71
 Name of Institution

Question 2) Find rank correlation coefficient between x and y.

X Y
85 18.3
91 20.8
56 16.9
72 15.7
95 19.2
76 18.1
89 17.5
51 14.9
59 18.9
90 15.4

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 Name of Institution
Question 3) obtain the rank correlation coefficient for the following data.

X Y
68 62
64 58
75 68
50 45
64 81
80 60
75 68
40 48
55 50
64 70
 REGRESSION
Name of Institution

• Regression analysis provides a mathematical model of

the relationship between two variables, in which one is
independent and one is dependent.
• If X and Y are two variables, then we have two
regression lines:-
(a) Regression line of X on Y.
(b) Regression line of Y on X.
 Regression line X on Y. Name of Institution

The regression line of X on Y is given by:-

X= a + b Y
where, b is called regression coefficient X on Y, denoted by
bxy
Here, Y is the independent variable and X is dependent
variable.
Normal equations to estimate a and b are:-

 X  na  b Y
 XY  a Y  b Y 2
 Name of Institution

Another form of regression equation X on Y is :-

X  X   r *  Y  Y 
x
y

x
Here , bxy r*
y
 Regression line Y on X. Name of Institution

The regression line of Y on X is given by:-

Y= a + b X
where, is called regression coefficient X on Y, denoted by
byx
Here, X is the independent variable and Y is dependent
variable.
Normal equations to estimate a and b are:-

 Y  na  b X
 XY  a X  b X 2
 Name of Institution

Another form of regression equation Y on X is :-

y
Y  Y   r *  X  X 
x

y
Here , byx  r *
x
 Properties of regression lines Name
andof Institution
coefficients
 
• Both the regression lines passes through the point x, y
• The correlation coefficient is the geometric mean of two regression
coefficients of X and Y
i.e r  bxy  byx
• If one of the regression coefficients is greater than 1,the other must be
less than 1.
• bxy and byx and correlation coefficient (r) have the same sign.
for eg:-if bxy = -0.664 and byx = -0.234
then r = -(0.664*0.234)1/2 = -0.394
 Name of Institution

QUESTION 1) You are given the following information about advertising

expenditure and sales.

Advertisement(x) Sales(y)
A.M 10 90
S.D 3 12

And r = 0.8
(a)Obtain the two regression lines.
(b)Find the likely sales when advertisement budget is Rs
15 lakhs?
 Name of Institution

QUESTION 2) The two regression lines are given by:-

3 X + 12 Y = 19
9 X +3 Y = 46
And σx = 4.
Obtain:-
(a). Mean values of X and Y.
(b) The value of correlation coefficient.
(c) Standard deviation of y.
 Name of Institution

Question 3. For the following data,

X 1 2 3 4 5
Y 2 5 3 8 7

Obtain the two regression equations and hence find the correlation coefficient.

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 Name of Institution

Question 4. The following data gives the ages and blood pressure of 10 women.

Age 56 42 36 47 49 42 60 72 63 55
B.P 147 125 118 128 145 140 155 160 149 150

(i) Find the correlation coefficient between age and blood pressure.
(ii) Determine the regression equation of blood pressure on age.
(iii) Estimate the blood pressure of a woman whose age is 45 years.

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