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 : KARL PERSON,S
CORRELATION
Teaching Aids : PPT, ANIMATION
CCP403.4 1
Objectives

On completion of this period you would be

able to:

 know the methods of correlation

CCP403.4 2
Recap:

In the last class, you learnt:

 Types of correlation

CCP403.4 3
METHODS OF CORRELATION

GRAPHIC ALGEBRAIC
METHODS METHODS

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A) Graphic Methods

 GRAPH / CORRELOGRAM

 SCATTER DIAGRAM / SCATTEROGRAM

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Graph / Correlogram

 Plotting TWO or more variables on GRAPH

 Study DIRECTION and CLOSENESS of TWO

CURVES

 Gives rough idea of Correlation

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Scatter Diagram

 Chart on which TWO variables are plotted

 Allows visual examination of relation between variables

 Helps selecting MODEL for ESTIMATION

 If points on chart show up or down trend, VARIABLES

are CORRELATED

 Else, variables have NO CORRELATION

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B) Algebraic Methods

 KARL PEARSON’S Co-efficient of Correlation

 SPEARMAN’s Co-efficient of Correlation

 Co-efficient of CONCURRENT DEVIATIONS

(out of syllabus)
 LEAST SQUARES METHOD (out of syllabus)

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Karl Pearson’s Method

 KARL PEARSON, a reputed statistician, developed

mathematical based formula for COEFFICIENT OF
CORRELATION in 1890

 Formula named after him as “KP’s Co-efficient of

Correlation” or “Pearson co-efficient of correlation”

 Also called “Product Moment Co-efficient”

 Denoted by symbol “r”

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Karl Pearson’s Co-efficient of
Correlation - Features

 Formula based on Arithmetic Mean and

Standard Deviation
 Determines Positive / Negative relationship
between variables
 Size of relationship ( +1 or -1 ) of two series
 Covariance most RELIABLE and hence COC an
IDEAL MEASURE

CCP403.4 10
Karl Pearson’s Coc
Individual Series – Direct Method

 Also called “Actual Mean Method”

 Deviations are taken from actual means
 Formula:
 r = ∑ x y / Nσxσy

COC = Co-efficient of Correlation

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Formula Explanation

 r = ∑ x y / Nσxσy

∑x y = Co-variance of x and y
x = (X – X) deviation in X series from its actual mean
y = (Y – Y) deviation in X series from its actual mean
N = Number of pairs of Observations
σx = Standard Deviation of X series
σ y = Standard Deviation of Y series

CCP403.4 12
Example - 1

Calculate the Karl Pearson’s

coefficient of correlation for data
below:

X 9 8 7 6 5 4 3 2 1
Y 15 16 14 13 11 12 10 8 9

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 Solution to Ex. 1
Calculation of Karl Pearson’s Coefficient
of Correlation
X (X-X) 2 Y (Y-Y) xy
x x y
9 4 16 15 3 9 12
8 3 9 16 4 16 12
7 2 4 14 2 4 4
6 1 1 13 1 1 1
5 0 0 11 -1 1 0
4 -1 1 12 0 0 0
3 -2 4 10 -2 4 4
2 -3 9 8 -4 16 12
1 -4 16 9 -3 9 12
∑X=45 ∑x=0 ∑x2=60 ∑Y=108 ∑y=0 ∑y2=60 ∑xy=57
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Solution to Ex. 1 contd
σx= ∑x2 =
√
60
√ N 9 = 2.58

σy= ∑y2 =
√
60
√ N 9 = 2.58

r = ∑ x y= 57
Nσxσy 9(2.58) (2.58)

r= 57
59.91 = + 0.951

Hence both the variables are highly positively

correlated
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Summary:

 Correlation is calculated through Graphic and

Algebraic methods
 Karl Pearson method of COC is very popular

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Quiz

1) Graphic methods of correlation:

(a) Bar diagram
(b) Pie diagram
(c) Scatter diagram
(d) All the above

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Assignment:

1) Calculate Karl Pearson’s Correlation for the

data:

X 1 2 3 4 5 6 7 8 9 10 11 12

Y 8 15 22 29 36 43 50 57 64 71 78 80

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Frequently Asked Questions:

1. List the methods of calculation of correlation.

2. What is a scatter diagram?

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