Correlation

Introduction:Correlation attempts to determine the degree of relationship between variables. Importations of Correlation: Some variables show direct relation whiles other show inverse relation. These correlation analysis help in measuring the degree of relationship between variables kind demand and supply, income and expenditure etc. If two variables are closely related, we can estimate of one variable again the value of other variables. The study of correlation is one the most widely area tool for tow variables. The techniques of ratio of variation and regression analysis depend and finding of coefficient of correlation. The effect of correlation is to reduce the range of variation and regression of ones prediction. The coefficient of correlation is a relative measure. So can compare the relation between variables expressed in different units.

Types of correlation

Positive and Negative correlation Simple or multiple correlation

 Linear and non-linear correlation

Positive and Negative correlation:If both the variables move in the some direction we say that there is a positive correlation. Example, if one variable increase the other variables also increase on an average on if one variable the other variables also decrease on an overage. Simple or Multiple correlations :If we study only two variables it is cause of simple correlation on the other hand, if a study more than two variables it is cause of either multiples or practical correlation. Example, If we a study three variables what consider that two variables are influencing each other. The kept the constant effect the other influencing. Linear and Non-linear correlation:If the change in the one variable is accompanied by change in other variable in the constant ratio. It is a cause of liner correlation. Observe the following data.

X Y

10 25

20 50

30 75

40

50

100 125

Ratio in change in the other variables example same, it is cause of liner correlation.

Degree of correlation

Perfect correlation:-

If the movements of coefficient in two variables is in the same proportion. There is a perfect correlation between them. If equal proportionate change is in same direction there is a perfect positive correlation.

Absence of correlation:No correlation exits when there is no interdependent between two variables. Limited Correlation:If there is an equal change in the same direction between two variables, it is cause of positive correlation. If there are unequal change in opposite direction. It is a cause of negative limited correlation. It can be three types 1. High degree correlation: - If value of coefficient of correlation between -+ 0.75 and -+ 1. It is high degree correlation. If the coefficient is +0.8. it a cause of positive high degree correlation and -0.8 correlation is cause of negative.
2.

Modern degree correlation: - If the coefficient of correlation between two variables lies between -+0.25 and -+ 0.75. It is cause of other moderate degree positive and negative correlation.

3.

Low degree correlation:If the coefficient of correlation between two variables lies between -+ 0.25 and 0. It is a cause of other low of positive and negative correlation.

Methods of studying correlation

Scatter diagram Graphic method Karl persons coefficient of correlation Spearmans rank coefficient of correlation Coefficient of concurrent Deviation method Scatter Diagram:This method is also known as dot graph or dot diagram. Scatter diagram is one of the simplest methods of diagrammatic representation of vicariate distribution. Under this matter both the variables are plotted on the graph paper by putting dots. The diagram show obtain is called scatter diagram

1.

If the plotted points are very close each other, if indicate high degree of correlation. If plotted points are away from each other. It indicates low degree correlation.

 If two point of the diagram show and upward trend from the bottom to right top, correlation is positive. It implies both variables move in the same direction. This is event from figure

Y X

Merits of scatter diagram It is the simple method of correlation of study correlation. By inspection, we cam from rough nature of relationship two variables. Most of mathematical of finding correlation inflected by the extreme item while method. It is easy to understand as it is a non-mathematical of studying correlation.

 By using these methods, we can draw appropriated estimating line or the line best fit.

Demerits of scatter Diagram This methods provides only rough idea of correlation we cannot find the exact degree of correlation. This method is not suitable, if the numbers of observation are large.

An

Assignment Business Statistics By Correlation and Regression

on

Submitted to:Submitted by:Mr. C.P. Garg Lect. In KAIM 1031 IIndSem.

Sujit kumar Roll. No. BBA-

KEDARNATH AGGARWAL INSTITUTE OF MANAGEMENT CH. DADRI

AFFILIATED TO M.D.U. ROHTAK (HARYANA)