Page 171 - DCOM203_DMGT204_QUANTITATIVE_TECHNIQUES_I

Quantitative Techniques – I Dilfraz Singh, Lovely Professional University

Notes Unit 8: Correlation Analysis

CONTENTS
Objectives
Introduction
8.1 Correlation
8.1.1 Definitions of Correlation

8.1.2 Scope of Correlation Analysis
8.1.3 Properties of Coefficient of Correlation
8.1.4 Scatter Diagram
8.1.5 Karl Pearson’s Coefficient of Linear Correlation
8.1.6 Merits and Limitations of Coefficient of Correlation
8.2 Spearman’s Rank Correlation
8.2.1 Case of Tied Ranks

8.2.2 Limits of Rank Correlation
8.3 Summary
8.4 Keywords
8.5 Review Questions
8.6 Further Readings

Objectives

After studying this unit, you will be able to:
Differentiate between univariate distribution and Bivariate Distribution

Categorize study of relationship between two or more variables
State the definition and scope of Correlation Analysis
Discuss the properties, merits and demerits of coefficient of correlation

Explain spearman’s rank correlation
Analyse the case of tied ranks and focus on limits of rank correlation

Introduction

So far we have considered distributions relating to a single characteristics. Such distributions
are known as Univariate Distribution. When various units under consideration are observed
simultaneously, with regard to two characteristics, we get a Bivariate Distribution. For example,
the simultaneous study of the heights and weights of students of a college. For such data also, we
can compute mean, variance, skewness, etc., for each individual characteristics. In addition to
this, in the study of a bivariate distribution, we are also interested in knowing whether there
exists some relationship between two characteristics or in other words, how far the two variables,
corresponding to two characteristics, tend to move together in same or opposite directions i.e.
how far they are associated.

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