Statistics for Economics for Class 11 Chapter 7 Correlation

Learn CBSE Statistics for Economics Index Terms for Class 11, Chapter 7 Correlation

1. Correlation – Correlation refers to a process for establishing the relationships between two variables. Correlation methods summarise the relationship between two variables in a single number called the correlation coefficient. The correlation coefficient is usually represented using the r, ranging from -1 to +1.

A correlation coefficient quite close to 0, positive or negative, implies little or no relationship between the two variables. A correlation coefficient close to plus 1 means a positive relationship between the two variables, with increases in one of the variables being associated with increases in the other variable.

A correlation coefficient close to -1 indicates a negative relationship between two variables, with an increase in one of the variables being associated with a decrease in the other variable. A correlation coefficient can be produced for ordinal, interval, or ratio level variables but has little meaning for variables that are measured on a scale that is no more than nominal.

2. Negative Correlation – When the values of the two variables move in the opposite direction so that an increase/decrease in the value of one variable is followed by a decrease/increase in the value of the other variable.

3. Positive Correlation – When the values of the two variables move in the same direction so that an increase/decrease in the value of one variable is followed by an increase/decrease in the value of the other variable.

4. Scatter Diagram – A scatter diagram is a diagram that shows the values of two variables, X and Y, along with the way in which these two variables relate to each other. The values of variable X are given along the horizontal axis, with the values of variable Y given on the vertical axis.

Later on, when the regression model is used, one of the variables is defined as an independent variable, and the other is defined as a dependent variable. In regression, the independent variable X is considered to have some effect or influence on the dependent variable Y. Correlation methods are symmetric with respect to the two variables, with no indication of causation or direction of influence being part of the statistical consideration.

5. Karl Pearson’s Coefficient of Correlation – Karl Pearson’s coefficient of correlation is defined as a linear correlation coefficient that falls in the value range of -1 to +1. A value of -1 signifies a strong negative correlation, while +1 indicates a strong positive correlation.

6. Spearman’s Rank Correlation – Spearman’s rank correlation coefficient helps us understand the correlation between the variables, which can’t be very meaningful and predominantly subjective. It is generally used to find the correlation in the case of qualitative variables.

We hope that the offered Statistics for Economics Index Terms for Class 11 with respect to Chapter 7: Correlation will help you.

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