Probability and Statistics

8229 WordsJul 14, 201333 Pages
University of Perpetual Help System Dalta Molino Campus Molino III, Bacoor City Probability and Statistics LAGERA, Einar John A. Table of Contents Simple Correlation Analysis ................................................................................................. 1 Introduction .................................................................................................................................................................. 1 What is Correlation? ............................................................................................................................................ 1 Discussion starts here(Simple Correlation Analysis)…show more content…
Before we have those chit-chats about Simple Correlation Analysis, let me define first what correlation is and its features. What is Correlation? Correlation is a measure of the relation between two or more variables. The measurement scales used should be at least interval scales, but other correlation coefficients are available to handle other types of data. Correlation coefficients can range from -1.00 to +1.00. The value of -1.00 represents a perfect negative correlation while a value of +1.00 represents a perfect positive correlation. A value of 0.00 represents a lack of correlation. Correlations are very useful because they can indicate a predictive relationship that can be exploited in practice. For example, an electrical utility may produce less power on a mild day based on the correlation between electricity demand and weather. In this example there is a causal relationship, because extreme weather causes people to use more electricity for heating or cooling; however, statistical dependence is not sufficient to demonstrate the presence of such a causal relationship (i.e., Correlation does not imply causation). Correlation often is abused. You need to show that one variable actually is affecting another variable. The parameter being measure is ρ (rho)
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