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Unformatted text preview: 1 it is interpreted as perfect
positive correlation.
If the value of CoEfficient of Correlation r is 1, it is interpreted as perfect
negative correlation.
If the value of CoEfficient of Correlation r is 0 < r < 0.5, it is interpreted as
poor positive correlation.
If the value of CoEfficient of Correlation r is 0.5 < r < 1, it is interpreted as
good positive correlation.
If the value of CoEfficient of Correlation r is 0 > r > 0.5, it is interpreted as
poor negative correlation.
If the value of CoEfficient of Correlation r is –0.5 > r > 1, it is interpreted as
good negative correlation.
If the value of CoEfficient 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.
 Spring '10
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