Correlation

In this lesson you will cover:

How to measure and interpret correlation

About the effects of scaling data on correlation
When two sets of random variables (bivariate data) are displayed on a scatter graph;
we are used to describing the correlation but how do you measure it?
Two sets of random variables (bivariate data) we can describe correlation but how do
you measure it?
x - = -
y - = +
- x + = +
x - = +
y - = +
+ x + = +
x
x
y
x - = -
y - = -
- x - = +
y
x
x
y
x - = +
y - = -
+ x - = +
y
x
Covariance how do you interpret it?

When the covariance is positive it suggests positive correlation

When covariance is negative it suggests negative correlation

When the covariance is close to zero it suggests no correlation.
( )( )
covariance = =

xy
S
n
y y x x
Covariance can you see any potential problems with this method alone?

When the covariance is positive it suggest positive correlation

When covariance is negative it suggest negative correlation

When the covariance is close to zero it suggests no correlation.

You guessed it:
(you dont know the range)
( )( )
covariance = =

xy
S
n
y y x x
Pearson Moment Correlation Coefficient
Karl Pearson
1857 - 1936
Is to standardise the covariance so that it
can interpreted easily. It converts the
covariance to a number between -1 to 1,
where:
-1 is a perfect negative correlation
1 is a perfect positive correlation
0 is no correlation
( )( )
( ) ( )
2 2
x x y y
n
r
x x y y
n n

=
| || |

| |
| |
\ .\ .

Pearson Moment Correlation Coefficient can be simplified to:
( )( )
y x
S S
y y x x
n
r

=
1
This is the covariance
This is the
standard deviation
of x
This is the standard
deviation of y
Task
Exercise A
Page 140



The effect of scaling
If you work out the correlation coefficient for sales of ice-cream & temperature
(t) in Fahrenheit. Would you expect the correlation to change if you worked on
the same data but in Celsius?

No scaling has no effect on correlation.
Be aware of correlation claims
Some things may look like they are connected but they are not:
General knowledge and height:
Children in a school from year 7 to year 13 are asked general knowledge questions. The correlation
is worked out using height and their score. In your opinion does height have any effect on their
score? If not can you suggest what is the explanatory factor that is connected to both?
Outliners
As all data items are used outliners will effect the correlation coefficient. When outliners are
obvious it is worth ignoring them altogether.
Non-linear relationships.
Pearson's p.m.c.c. is only suitable for linear relationships
Task
Exercise C
Page 144

Test yourself
Page 145

HOMEWORK!!!!!!!!!!!!
Past papers
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Go through each of the chapters:
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