bus-stat-book1

Bus-stat-book1

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Unformatted text preview: Perfect positive correlation. We denote this as r = +1 Perfect positive Correlation r = +1 Perfect Negative Correlation Y Y O O X axis (r = −1) O 192 X axis X 1. If all the plotted dots lie on a straight line falling from upper left hand corner to lower right hand corner, there is a perfect negative correlation between the two variables. In this case the coefficient of correlation takes the value r = -1. 2. If the plotted points in the plane form a band and they show a rising trend from the lower left hand corner to the upper right hand corner the two variables are highly positively correlated. Highly Positive Highly Negative Y Y O O X axis X axis 1. If the points fall in a narrow band from the upper left hand corner to the lower right hand corner, there will be a high degree of negative correlation. 2. If the plotted points in the plane are spread all over the diagram there is no correlation between the two variables. No correlation ( r = 0) Y O X 193 Merits: 1. It is a simplest and attractive method of finding the nature of correlation between the two variables. 2. It is a non-mathematical method of studying correlation. It is easy to understand. 3. It is not affected by extreme items. 4. It is the first step in finding out the relation between the two variables. 5. We can have a rough idea at a glance whether it is a positive correlation or negative correlation. Demerits: By this method we cannot get the exact degree or correlation between the two variables. Types of Correlation: Correlation is classified into various types. The most important ones are i) Positive and negative. ii) Linear and non-linear. iii) Partial and total. iv) Simple and Multiple. Positive and Negative Correlation: It depends upon the direction of change of the variables. If the two variables tend to move together in the same direction (ie) an increase in the value of one variable is accompanied by an increase in the value of the other, (or) a decrease in the value of one variable is accompanied by a decrease in the value of other, then the correlation is called positive or direct correlation. Price and supply, height and weight,...
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This note was uploaded on 01/18/2014 for the course BUS 100 taught by Professor Moshiri during the Winter '08 term at UC Riverside.

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