The value of co efficient of correlation always lies

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Unformatted text preview: 1 it is interpreted as perfect positive correlation. If the value of Co-Efficient of Correlation r is -1, it is interpreted as perfect negative correlation. If the value of Co-Efficient of Correlation r is 0 < r < 0.5, it is interpreted as poor positive correlation. If the value of Co-Efficient of Correlation r is 0.5 < r < 1, it is interpreted as good positive correlation. If the value of Co-Efficient of Correlation r is 0 > r > -0.5, it is interpreted as poor negative correlation. If the value of Co-Efficient of Correlation r is –0.5 > r > -1, it is interpreted as good negative correlation. If the value of Co-Efficient of Correlation r is 0, it is interpreted as zero correlation. Probable Error Probable Error of Correlation coefficient is estimated to find out the extent to which the value of r is dependable. If Probable Error is added to or subtracted from the correlation coefficient, it would give such limits within which we can reasonably expect the value of correlation to vary. Sikkim Manipal University Page No. 207 Research Methodology Unit 11 If the coefficient of correlation is less than Probable Error it will not be significant. If the coefficient of correlation r is more than six times the Probable Error, correlation is definitely significant. If Probable Error is 0.5 or more, it is generally considered as significant. Probable Error is estimated by the following formula PE = 0.6745 (1- r2/ N) 11.13.4. Coefficient of Determination Besides probable error, another important method of interpreting coefficient of correlation is the Coefficient of Determination. Coefficient of 2 Determination is the square of correlation or r . For instance, suppose the coefficient of correlation between price and supply is 0.8. We calculate the coefficient of determination as r2, which is .82 or .64. It means that 64% of the variation in supply is on account of changes in price. Spearman’s Rank Correlation Method Charles Edward Spearman, a British psychologist devised a method for measuring correlation between two variab...
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This note was uploaded on 04/15/2010 for the course MBA mba taught by Professor Smu during the Spring '10 term at Manipal University.

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