Download - Correlation in simple terms
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Correlation explained
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Correlation explains Relation between two
variables
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X Y
Correlation
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X
Y
NEGATIVE CORRELATION
When X increases
Y decreases
-
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X
Y
NEGATIVE CORRELATION
When X decreases
Y increases
-
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X Y
POSITIVE CORRELATION
When X decreases Y also decreases
+
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X Y
POSITIVE CORRELATION
When X Increases Y also Increases
+
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Confused?
See Next....
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Got it!
Correlation When?
+ X and Y move in same direction
_ X and Y move in opposite direction
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Correlation coefficient
Measures
Correlation
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Correlation coefficient is always between -1
and +1
Because, it is just a
scale and it is defined like that.
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0 +1 -1
X and Y move in opposite direction
X and Y move in same
direction
Correlation coefficient between variables X and Y
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0 +1 -1
Correlation coefficient between variables X and Y
NO Correlation
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Scatterplots – Positive correlation
X Y 1 2 4 3 6 5 7 7 9 2
11 11
0
2
4
6
8
10
12
0 5 10 15
Variable Y
Variable X
Graph of Y plotted against X
Linear (Y)
Trend line has positive slope -
Positive correlation
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Scatterplots – Negative correlation
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X Y 1 10 4 8 6 5 7 3 9 2
11 11
0
2
4
6
8
10
12
0 5 10 15
Variable Y
Variable X
Graph of Y plotted against X
Linear (Y)
Trend line has negative slope -
Negative correlation
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Scatterplot – zero correlation
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X Y 1 100 2 99 3 98 4 99 5 100
97.5
98
98.5
99
99.5
100
100.5
0 1 2 3 4 5 6
Y
Y
Linear (Y)
Trend line has zero slope – Zero correlation
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Scatterplot – zero correlation
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X Y 1 100 2 100 3 100 4 100 5 100
0
20
40
60
80
100
120
0 1 2 3 4 5 6
Y
Y
Linear (Y)
Trend line has zero slope – Zero correlation
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= Interpretation of correlation coefficient
‘Correlation does not mean causation’. That means if two variables have high correlation
then an inference CAN NOT be made that one is dependent on another or one is the cause of
other.
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Correlation Causation
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Mathematically!
n*(∑XY) – (∑X)*(∑Y) SQRT[ (n*∑X^2 – (∑X)^2) * (n*∑Y^2 – (∑Y)^2)]
Corr. Coefficient =
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Pearson correlation (What we discussed till now) represents only a linear relationship
between two variables although the actual relationship between two variables may or
may not be linear.
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Thanks!
For more information refer to
https://stats2analytics.wordpress.com/2016/05/12/correlation-explained/
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