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Questions and Answers
What is the main purpose of partial correlation analysis?
What is the characteristic of linear correlation?
What is the primary objective of correlation analysis?
Which of the following is an example of perfect positive correlation?
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What is the benefit of correlation analysis in business?
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What is the range of the correlation coefficient?
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What is the significance of correlation analysis in practical life?
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What is the purpose of controlling for the effect of other independent variables in partial correlation analysis?
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What is the main difference between linear and non-linear correlation?
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What is the characteristic of non-linear correlation?
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What is the relationship between correlation and regression analysis?
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Which type of correlation analysis is used to study the relationship between yield of rice and rainfall, while controlling for the effect of fertilizer used?
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Which of the following is NOT a type of correlation?
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What is the advantage of using correlation analysis in decision making?
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What do Boddington and Lunchou agree on regarding correlation analysis?
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What do Simpson and Kafka say about correlation analysis?
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What is the characteristic of perfect negative correlation?
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What is the term used to describe a correlation where an increase in one variable is followed by a non-proportional increase in another variable?
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What is the term used to describe a correlation where an increase in one variable is followed by a non-proportional decrease in another variable?
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What is the characteristic of zero correlation?
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If a 10% rise in price results in a 5% fall in demand, what type of correlation is this?
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If a 10% rise in price results in a 10% fall in demand, what type of correlation is this?
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If a 10% fall in price results in a 5% increase in demand, what type of correlation is this?
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What is the main difference between perfect negative correlation and limited degree of negative correlation?
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What can be inferred from the direction and closeness of the two curves in the correlation graph?
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What is a limitation of the correlation graph method?
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What is Karl Pearson's Co-efficient of Correlation also known as?
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What is the formula for Karl Pearson's Co-efficient of Correlation?
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What is a merit of the correlation graph method?
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What is not possible with the correlation graph method?
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What is the name of the method that plots all the values of two variables in a chart in the form of dots?
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What is the advantage of using a scatter diagram to study correlation?
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What is the purpose of creating a scatter diagram?
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What is a limitation of using a scatter diagram to study correlation?
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What type of correlation is indicated by a scatter of dots in a scatter diagram?
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What is the name of the method that involves plotting individual values of two variables on a graph paper?
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Which of the following is a characteristic of a scatter diagram?
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What is the first step in investigating the relationship between two variables?
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Study Notes
Correlation Analysis
- Correlation analysis is a statistical technique used to study the relationship between two or more variables.
- It helps to determine the degree of relationship between variables.
Types of Correlation
- Partial Correlation: A correlation analysis that considers one dependent variable and one independent variable, while keeping the other independent variables constant.
- Linear Correlation: A correlation where the ratio of change between two sets of variables is the same.
- Non-Linear Correlation: A correlation where the amount of change in one variable does not bring the same ratio of change in the other variable.
Degrees of Correlation
- Perfect Positive Correlation: A correlation where an increase in one variable is followed by the same proportion of increase in the other variable.
- Perfect Negative Correlation: A correlation where an increase in one variable is followed by the same proportion of decrease in the other variable.
- Limited Degree of Positive Correlation: A correlation where an increase in one variable is followed by a non-proportional increase in the other variable.
- Limited Degree of Negative Correlation: A correlation where an increase in one variable is followed by a non-proportional decrease in the other variable.
- Zero Correlation: A correlation where there is no correlation between variables.
Correlation Coefficient
- The correlation coefficient is a numerical value that expresses the degree of correlation between two or more variables.
- It ranges from -1 to +1.
Significance of Correlation Analysis
- Correlation analysis is useful in practical life because it helps to:
- Find a single figure to measure the degree of relationship between variables.
- Understand economic behavior.
- Estimate cost, price, and other variables.
- Reduce the range of uncertainty associated with decision making.
- Provide a basis for the study of regression.
Methods of Measuring Correlation
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Graphic Methods:
- Scatter Diagram: A method that plots the values of two variables in a chart to form an idea of whether the variables are related or not.
- Correlation Graph Method: A method that plots the individual values of two variables on a graph paper to infer whether the variables are related or not.
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Algebraic Methods:
- Karl Pearson's Co-efficient of Correlation: A method that calculates the correlation coefficient using the covariance between X and Y and the product of their standard deviations.
- Spearman's Rank Correlation Method: A method that calculates the correlation coefficient using the rank of the variables.
- Concurrent Deviation Method: A method that calculates the correlation coefficient using the deviations of the variables from their means.
Merits and Demerits of Correlation Methods
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Scatter Diagram Method:
- Merits: Simple, non-mathematical, easy to understand, and not influenced by extreme items.
- Demerits: Only gives a rough idea, cannot calculate correlation coefficient, and cannot establish exact degree of relationship.
-
Correlation Graph Method:
- Merits: Simple, easy to understand, and does not require mathematical calculations.
- Demerits: Cannot calculate correlation coefficient, only a pictorial presentation, and cannot establish exact degree of relationship.
-
Karl Pearson's Co-efficient of Correlation:
- Merits: Most popular method, widely used, and provides a precise measure of correlation.
- Demerits: Requires mathematical calculations and can be complex.
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Description
This quiz covers the basics of correlation analysis, including types of correlation such as partial and linear correlation, and its application in statistical analysis.
